Q1 2020 Earnings Call
Ladies and gentlemen, thank you for your patience will begin in about one more minute. Once again. Thank you for your patience, we will begin in about one more minute. Thank you.
[music].
And once you require operator systems during the conference. Please press Star Zero on your telephone keypad. Please note. This conference is being recorded I'll now turn the conference over to your host Michael Wood at my exciting lives you may begin.
Hi, good morning, everyone and thank you for joining us forward together.
Remarks. This morning, I'll remind you that somebody information news release on this conference call contain forward looking statements that involve risks uncertainties assumptions that are difficult to predict what's that express and reflect optimism satisfaction with current progress prospect or projections as well as words, such as believe intent Expo.
Back to plan anticipate a similar variations identify forward looking statements by their absolute does not mean that a statement for talking such forward looking statements are not a guarantee your performance and the company's actual results could differ materially from those contained in such statements. Several factors that could cause or contribute to such differences are described in detail in middle of therapeutics.
Thanks, what do you see these forward looking statements speak only as of the date date of today's press release in conference call. A company takes no obligation to publicly update any forward looking statements or supply new information regarding the circumstances. After the date of this call.
So this time I like to try to call over to Dave Domzalski, Chief Executive Officer Military avionics, Dave. Please go ahead.
Hi, Michael and good morning, everyone.
Joining me on the call is not wildly our chief commercial officer, and Andrew sake, I recently appointed Chief Financial Officer, who will take you through our financials.
We're very pleased to have and join the team as this is his first quarterly call. It does someone welcome him.
So today I will provide you with a brief update on both our commercial business as well as our pipeline and then we'll turn the call over Tonight and Andrew to provide more details.
As you know, we launched our first product and Zeke in January.
We have a PDUFA date coming up on June 2nd for our second product at the next one of three and assuming it's approved that will put us on track to launch our second product later this year.
And our phase two study in ACMI for FCB, you want to five is slated for read out in the coming weeks as well.
To begin in early March we successfully closed the merger and which Foamix became a wholly owned subsidiary of Menlo Therapeutics.
While we were disappointed with the outcome of the swap in in Phase three results that were subsequently announced the transaction had been structure to provide a certain amount of protection to PHARMAQ shareholders and the advent of this outcome.
The issuance of the contingent stock rights resulted in 82% ownership in the combined entity for Foamix shareholders, providing an adjusted ownership split for both legacy Menlo in Foamix holders.
The transaction also resulted in a higher cash balance for the combined company.
Additionally, as a result at the merger. We're now also a U.S. domiciling publicly traded company.
The lots of M.C.R. topical minocycline foam product into the U.S. market as a treatment for moderate to severe acne mark the transition of Menlo from a development stage organization to a fully integrated commercial company.
We're very pleased by the initial results of the launch of Ams IEC as well as the reception from patients in health care providers for our product, even though the momentum has understandably slowed as a result of cobot 19.
The strong prescription numbers, we solved through the middle of March However, give us confidence that we will be able to successfully market the product as a cobot 19 situation stabilizes in the U.S.
That will give you an update on our commercial strategy, but suffice it to say, we're doing everything we can to educate our customers they're not the features and benefits of Bam zinc and increased trial and use of our product during the carbon 19 situation and that's physician offices continue to open.
FMX, one or three I want a half percent minocycline foam for the treatment of Papulopustular Rosacea is currently being reviewed by the FDA, which has set a target PDUFA action date of June 2nd of this year.
We about fluid exchanges with the agency and we do not anticipate a change in the PDUFA date.
If approved our current expectation remains for a launch of FMX, one or three in the fourth quarter.
The India includes what we believed to be a very strong clinical package both of our phase three clinical trials that support the application met each of their co primary endpoints demonstrating a statistically significant improvement in the reduction in inflammatory lesion counts and now GA treatment success.
Yeah, I want to three our most advanced pipeline product is FCD went up five for the potential treatment of acne.
C. D went up five as our topical combination product utilizes our MSP bone platform and comprises a 3% concentrates that minocycline and he 0.3% concentration of adapting.
I believe is one of the most widely used topical retinoids to treat coming out of whack me.
Actually do you want to five is currently in a phase two trial, which completed enrollment late in 2019.
We remain on track right anticipated data read out this quarter.
We had our last patient out of the trial before the cobot 19 shut down so we do not expect any impact on the timeline of a read out of topline results, perhaps see do you want to abide.
We believe that if approved this combination product of minocycline and adopt Blaine could provide a novel therapy to potentially address unmet needs of patients in health care providers.
Finally, we were pleased to announce a few weeks ago, our license agreement with two tier therapeutics to market and seek in China as well as our other topical minocycline products. When approved this license agreement provides a $10 million upfront payments Menlo plus mid single digit royalty payments on net sales of any of our licensed products too.
Good to yet.
We believe this transaction further validates our technology and the potential of and seek.
It also helps would've by our balance sheet with non dilutive funding.
We will continue to seek additional partnership out two entities and non U.S. territories, where our topical minocycline product portfolio.
With that let me now turn the call over to not Wiley, who will provide an update on our commercial activities.
Thanks, Dave.
The early launch a damn decreased very promising.
The initial uptake in feedback from physicians theater expectation and we remain optimistic about how big will be used to treat patients with moderate to severe act.
The washes, obviously been interrupted by overnight team and we thought pullback in prescription dermatology often closed due to government restrictions.
Our field force. However has stayed engage and continued to make sales calls virtually.
While the volume of calls per day has been reduced in the virtual environment.
In many cases.
Duration of and quality of those calls has improved.
We have found in the virtual environment. Many of our physician customers now have more time to learn about empty and differentiated attributes.
We believe this should help increase the level of awareness of antique and ultimately trial for the brand.
Despite the various government restrictions due to Cobot Nike Inc.
A number of unique prescribers continues to grow week over week, even during the period of shut down.
There are banned over 3200 unique prescribers of and be since launch with over 500 them coming since the week ending March 13, which was the last week.
Non impact sales.
We've been able to reach over 90% of our targets since launch.
We're also seeing productivity ever targets growing averaging eight prescriptions per target in over 10 from our most important customers, whom we refer to as our platinum targets.
In February we hosted a national satellite broadcast the bad.
With two of the most prominent key opinion leaders in the field back me soccer, Jim del Ross, So and when deciding.
This thing love that drew over 350 attendees at 38 lives.
We have also hosted over 30, Leiden virtual speaker programs that have reached a total of 250 it Andy.
The field force is now redeploying where possible as government restrictions ease.
In areas that are reopening now.
There are some obvious changes to how we accessed physician offices and of course, no. One knows how quickly acne patients will return for diagnosis and treatment.
This is happening now in some parts of the United States and we expect that statin counties will continue to ease restrictions over time.
Allowing more direct selling activity.
As we look at the last few weeks a prescription trends. It appears that the initial decline to stabilize and we're now beginning to see volume for both enter axis and Trx increase.
We are encouraged by that.
As we navigate through the process of dermatologist reopening their offices.
We will continue to leverage all the tools, we have at our disposal in our efforts to increase demand Ramsey.
Our market access strategy continues to execute as planned and we continued to build towards broad access Ramsey.
We currently have approximately 50% of the market under contract.
We were recently removed from the exclusion list of one of the largest pvms.
And this will increase our access now to approximately 60% of commercial lots.
Our access strategy is on track as we continue to work with remaining keep payers to ensure broad access storefront.
We're also using this time to prepare for what we hope to be an approval and subsequent launch FMX one to three.
As you know Duke a date for FMX one of the three is June 2nd.
Assuming it is approved our plan is to launch the product in the fourth quarter of this year.
The patient and healthcare professional called on universe overlap between Andy could FMX one of the three is approximately 80%.
We build our salesforce in anticipation of launching both products and do not foresee a change in the structure due to the launch of FMX, one or three.
There will be some incremental law launch costs, but given the similarities or the products.
We will be able to leverage much of the commercial apparatus already built frenzy.
Our strategy for market access for FMX, one of the three well leverage existing contracts heres knowledge.
The antique formulation its value proposition in price, which we hope will make the formulary review and contract process efficient.
I'll now turn the call over to Andrew sake to review the financials Andrew.
Yes, Thank you Matt.
Before I start with a review of the numbers I want to remind everyone. This is the first time that we have reported as the new Menlo Therapeutics post the merger between Menlo and Foamix.
The deal structure had menlo at the legal acquire but further to the equipped counting acquire so all historic numbers contained in our 10-Q or foamix through the merger date, and then combined financials thereafter.
Revenues totaled $1.8 million for the first quarter 2020, compared with point 3 million in the comparable period for 2019 revenues. In Q1 2020 were generated from products sales of MZ, which we launched in January of 2020.
For the first quarter 2019 revenues consisted solely of royalties from our out licensed products Finacea foam.
The decrease in royalty revenues for the first quarter 2020 years compared royalty revenues for the first quarter of 2019 was due to a stock out of Phoenicia, which resulted in no royalties this quarter.
In April 2020, however, Leo informed us that it had remedied their supply chain issues related to Finacea foam and has resumed commercial activities for poor finacea foam in the U.S.
Cost of goods sold were <unk> point 3 million for the first quarter 2020, our gross margin percentage of 85% was favorably impacted during the quarter by product sales with certain materials produced prior to the FDA approval and therefore expensed in prior periods.
Inventory sold during the first quarter 2020 was valued at cost than our gross margin for the period would have been 79%.
There was no cost of goods sold in the three months ended March 30, Onest 29 team because our revenues in that period consisted solely of royalties.
Our R&D expenses for the first quarter 2020 were $16 million compared to $10.8 million for the first quarter 2019.
This increase was the result of higher employee related expenses, including 3.8 million related to the severance expenses associated with legacy Menlo employees.
And as well as increased payroll and related expenses.
In addition, clinical and manufacturing costs related to certain Robinson increased by $2.2 million.
This was offset by a decrease of approximately $2.2 million related clinical manufacturing expenses for MZ and FMX, one or three.
Our selling general and administrative expenses for the first quarter 2020 were 25.4 million compared with $5.3 million for the comparable period in 2019.
This was driven by employee related expenses, which increased by $10.5 million consisting of $6 million, primarily due to the expansion of our employee base, including the hiring of the salesforce as well as $4.3 million related to severance expenses to legacy Menlo employees.
We incurred $3.6 million in expenses relating to the merger, including SGN a expenses.
Sales and marketing expenses increased by 1.8 million related to the commercialization of the EMS IEC.
Total onetime expenses related to the merger and consisting primarily of severance and merger costs were $11.7 million in the first quarter.
Our net loss for the first quarter 2020 was 40.2 million or 95 cents per share as compared to 15.2 million or 47 cents per share in the first quarter 2019.
The increase in net loss was primarily due to an increase in expenses incurred in connection with our commercial launch of bins IEC together with the merger expenses and severance expenses for Menlo employees.
Our weighted average share account reported in our first quarter financial results the timing of the merger and was approximately 40 million shares.
The actual share count at the end of Q1 as disclosed in our risk in our 10-Q was 61 and a half million shares.
In April we announced the outcome of the phase three through opened in trials, resulting in the conversion of the csrs from the recent merger, which result in the issuance of 74.5 million Menlo shares to Foamix shareholders of record as of the closing date.
This means that our current share count post the issuance of shares related to the CSR conversion is approximately 136 million shares.
Our cash and cash equivalents and investments totaled 82.7 million as of March Thirtyth 2020. This amount does not include the $10 million upfront painless payment that we are due to receive in connection with the licensing deal with Q tier therapeutics.
Due to the covert 19 impact and the resulting disruption of the M. Zeke launch and with the recent failure so often.
We have reevaluated, our cost structure and implement a cost savings initiative that we believe was necessary to extend our cost runway.
I wanted to be clear. However, the these cost savings initiatives did not impact the size of our field force and we remain firmly committed to the launch of MZ and FMX 103 later in the year.
Changes that were made include us moving from primarily an internal to an external product development model, which is more cost efficient and flexible it will better served the company moving forward.
We also moved quickly eliminate all legacy Menlo expenses from the organs. The organization post the circle up and then result.
Additionally, as we do not have any large scale trials ongoing or scheduled in the near term we reduced our support for clinical activities, but are maintaining appropriate clinical capability for the future.
You will appreciate that making projections of cash runway is highly uncertain in the current market given the impact and potential future impact of covert 19.
We believe however that with the cost savings initiatives put in place and with the cash from the Q tier license that we continue to have a cash runway into Q2 next year without the need to take on additional debt or equity financing.
We remain laser focused on the EMS IEC launch as well as the planned launch of FMX, one or three in the fourth quarter assuming approval.
Even as we aggressively manage our costs in the short term to extend our cash runway and look forward to the data read from FCD 105 later this quarter.
Ill now turn the call back to Dave for closing remarks.
Thanks Sandra.
Before I close on behalf of my fellow colleagues on board members are heartfelt sympathies goes out to the families who have lost loved ones from the cover 19, Corona virus and our best wishes for a full and speedy recovery go to those who are currently fighting this illness.
And certainly our gratitude as sensitive countless healthcare workers and first responders, who work tirelessly on the front lines. During these times.
In closing, we continued to be resolute in our vision to create a scaled business in therapeutic dermatology through the development and launch of innovative products to address unmet needs of patients.
We believe our initial strong launch efforts brand zig reflect the strength of the product and our commercial strategy.
Which we intend to replicate with the launch of FMX, one to three in rosacea when approved.
As always we plan to deliver on these calls while ultimately building long term value for our shareholders.
That concludes our prepared remarks.
We are ready now to open up the call to QNX, So I'll turn it back to the operator.
At this time will be conducting a question and answer session. If you would like to ask your question. Please press star one on your telephone.
A confirmation total indicate your line is in the question Q you May Prestart too if you like to remove your question from the Q for participating speaker equipment, maybe necessary to pick up your answer before freshness turnkey.
One moment, please what we call for questions.
Our first question is from Louise Chen from Cantor Fitzgerald. Please proceed with your question.
Hi, Thanks for taking my questions. So my first question is if you could provide more color on the stabilization and pick up of the Ams IEC, our taxes that you're seeing how many weeks is this band and in addition to be opening of offices what else is driving this and then secondly, you talked about this cost.
Saving initiative I was wondering if you could give us more color on <unk> and R&D expenses in the second quarter relative to the first quarter given your comments here and then on the margin side is 79% what we should be using in the second quarter for sale and then last question I have for you is on FMX, one or three you're ahead of a launch here what is your go to market Street.
Got it Gi and with this product fit into the treatment on Rytary I'm for patients and physicians. Thank you.
Actually so while I've got a couple of question is are there from his I'll turn to first whatever not provide some more color on the stabilization and pick up Ramsey X amount you want to take that.
Sure. Thank David Thanks.
Question.
No well we've observed in probably the last five or six data points, it's been a bottom or kind of out formation of the bottom of our trx is and so the last data we have wishes from a week ago.
We see that there's been a slight uptick and your axes I think thats due to the fact that we had a handful of reps out making life calls about two weeks ago.
We had a much larger number.
Last week.
And we anticipate actually that the majority of our sales representatives have some live call activity.
This week, so I think that that kind of speaks to the stabilization initially due to the virtual efforts that we undertook.
Then the additional growth that we've seen at least in the last one data point that we had.
As Ben due to some of that live activity and.
Probably more physicians seeing patients in their practices.
Yes, Thanks, Matt.
Luis all a this is Andrew and I will take the the next two questions.
Regarding to your cost savings, we're not going to provide specific guidance on this call, but I think relative to Q2, what you're going to see as a gradual decrease in our expenses relative to Q1.
We had in Q1 as you know we had a launch of them Zeke and we had two clinical trials wrapping up.
One on sort of off and and then obviously one of the three.
I think that you're going to see a gradual decrease of expenses that should kind of stabilize into a new norm, but later in the or call. It by Q4.
With regard to gross margin.
Gross margin is going to be a little bit variable in the near term I think Matt has talked previously about the use of the trial card that we're using in launch as we bring various.
Medical groups of formulary.
That should stabilize.
I think Dave has as guided at a 90% gross margin going forward I think that will slowly see us getting closer to that numbers, we moved into the year.
That I'll offer some initial thoughts on on the go to market strategy.
And then turned over to match.
But just just to echo his thoughts on the stabilization in pickup brand Zika I get I'm very pleased with the work that our team has done under very challenging environments.
The virtual efforts that the team has deployed.
As Matt outlined certainly seems to stress that we've we've stabilized the business.
The we've seen increases in time with physicians.
Quality of of the calls with health care providers, I think all that bodes well for us as all continue to open to open up.
So again very very pleased with the work at the team has done under very challenging environments for FMX, one or three as we've said we've always view that the relation marketplaces is a.
As an untapped marketplace for an opportunity for a product such as at the next one of three.
Though it's a smaller marketplace side than the acne arena.
There is less competition you are products that are in development in the category and when we take a look at the data from FMX. One of 300 clinical trials not only do we have very strong EPS. The results our primary endpoints and reduction of lesion counts, but we also saw that had a very meaningful impact on secondary endpoints such.
Such as improvement and air theme, which waste as you know that our products in the marketplace. Specifically indicated just for that so we believe the product has lots of optionality lots of potential in the category, we know from our discussions with health care providers.
That they are eager for a new product to address patients I met needs for this condition.
I think we'll deploy a lot of the same focus efforts that we've done with and seek.
And so I'll turn it over to map provide some additional color on a go to market strategy.
Sure. Thanks, Dave and so we see a couple of things to note here one is that what we found in primary market research.
Is that better than 70% of the current rosacea patients.
Our.
Just satisfied with their current treatment in other words that are likely or extremely likely.
To choose another therapy, if something were to come to market.
And we've seen this also in retrospective claimed analysis as well, where we see that roughly 70% would either discontinue or switch medications after their first diagnosis and.
Our pubic option.
So this coupled with what we see from physician behavior and how they've responded in market research.
Where there is a high preference share for the product profile of FMX one of the three.
Really gives us an opportunity to position around this unmet need so.
As we think it the go to market strategy, it's really predicated on unique positioning not dissimilar to what we did with AMC.
Focusing more so on the unmet need and the clinical profile of FMX, one or three.
We.
How many ambition to accelerate.
Our support.
And market access.
Environment to ensure that we do have broad access.
For the product and then there are a couple of unique.
Discoveries that we've made in the market itself that we plan on using as part of our platform I'm not going to disclose those here for competitive reasons, but we think they offer us significant opportunities.
Especially as they a smaller company to compete with larger competitors and we're going to.
Use that leverage target range.
Okay, great. Thank you.
And our next question from David Amsellem pipe with Sandler. Please proceed with your question.
Hi, everyone. This is that on for David Ah. Thank you for taking our question on this is a bit of a longer term question, but we're hoping to get a better sense of how the recent transition to telemedicine and other digital initiatives like permanently impact the promotional landscape and the brought it down space and what that might mean long.
<unk> for and seek and acne and it was asked yet and Oh after that thank you.
Hi, Matt.
Sure. So we're seeing an increase in telemedicine, and we believe that acne and potentially rosacea are.
The state that could be.
Could benefit from the advance and Tele medicine.
We would expect that as physicians become more comfortable with the platform.
We will see an increase in diagnosis of course, where we focus our efforts is predicated on patient concentrations. So regardless of whether physicians are using a telemedicine platform or seeing patients live in their office.
We're.
Building our.
Our targeting approach around that patient volume.
So we will continue to educate our conditions.
Either in a virtual environment during the cobot 19 I.
Situation or alive as we have historically.
With those physicians, who are using either a live or tele medicine platform.
That's that's pretty much yet yeah.
Okay, great. Thanks, and then one quick question regarding and seek given the macro economic landscape and less disposable income in general could you maybe speak directly to the extent to achieve will provide greater patient out of pocket support over the long term. Thank you.
Sure I mean, right now we do have a co pay relief.
Program in place and we are.
Wrapping up a benefit of $40, but basically buying the prescription down to 35 as part of that co pay release.
We also have a did now conversion program in place, but that typically goes away. After you secured broad access that's always been our ambition to have brought back that's where the patient out of pocket exposure is relatively light.
We always have flexibility in the future to make changes to those programs as we need to but we feel like we've got a pretty good program right now in place.
The capture the majority of the patience and minimize the out of pocket burden.
Great. Thanks, that's helpful.
And our next question is from Stacy two from Cowen and company. Please proceed with your question.
Good morning, Thanks for taking my questions and a lot of text on my welcome to Andrew.
But just a question on.
The remaining managed care contracts for Ensync.
Its full expect will put him for additional contacting.
Yeah.
Thank you that you're willing to provide some guidance.
Hi.
My title I Didnt hear a long term.
Well up.
Sure I'll provide some initial thoughts on managed care and I'll turn it back to Matt and then Andrew can provide some thoughts on on net pricing buds.
As alluded to we're quite pleased with our.
Contacts in our exchanges with the payers I think it goes the heart of our pricing and reimbursement strategy.
Which was to ensure patients and health care providers can get access to our product. That's our thats, obviously, our most important objective, but to do so also and I have responsible manner.
We've taken the approach to partner with payers in the managed care managed since the very beginning actually 18 months plus before we even launched the drug.
So I believe it's it continues to pay off well for US as you know we within the first two weeks of launch we had under contract one of the largest PBM express scripts and whats antique was added to the point of their national formulary and a tier two preferred status that was unexpected for us. If we were pleased with that as a.
We alluded to on our call. So far today, we've been removed from the exclusion list from another one of the largest pbms.
Our our discussions in terms of contracts are.
Our fluid we hope to have additional announcements in the coming weeks.
Our objective has been to have the majority of the major payers under contract as we go into the third quarter. We continued to be on target for that and we've found also that additional payers that we're not in our modeling.
In some of the region say out in the West Coast.
I've come to the table.
To negotiate contracts with us I think again that goes to the benefits of the product itself. The view for the payers has consistently been that and Zeke provides a unique benefits that to payers to patients. So it's not viewed us as a.
As I, just say a new dosage form.
We continue to have a product go through full PNC read a review and so I think the clinical merits of the product coupled with our pricing strategy.
Continues to to be supportive and we continue to see that.
Turn it over to Matt to have any additional.
Thoughts on the cadence of of our efforts in Andrew could talk about net pricing.
Sure. Thanks, Dave Yeah, and I think Dave has.
Pretty much summed up there what I'll say that conversations with the payers have been good.
It's consistent with the market research that weve shelters shared on previous calls than in previous venues.
And.
We feel optimistic about being able to secure that broad access that it.
And our ambition since the start.
Andrew.
Yeah. Thanks, Matt.
Yeah and Stacy. Thank you for the question in the welcome really happy to be here with regard to net price on M. Zeke, we've taken decision to wait a bit and see how the market develops you know what I can tell you is we're really happy with our contracting we think that that's going extremely well and as.
Matt alluded to we expect to have full coverage.
We do not view this product is something that we need to give away right. We think that theres a huge value add with the product. So we're taking a.
Position, where we're negotiating prices that we think are very fair to both us and to the derm offices.
And we'll be able to give you more guidance later in the years as things develop with the product.
Yeah, I'll just add before as they seem to have any additional questions is.
As we are in discussions with the payers Ram zinc.
We've obviously, let the payers now that we had we hope to have another product at the next one or three.
That will come back to them on so since it's the same product.
At a different concentration any different indication.
Since we're going through the efforts now getting under contract for AMC, We hope that to the should facilitate a quicker process and having at the next one or three assuming approved added to the formulary is for these various plants.
That's great. Yeah, you kind of answered my second question I guess, a just a specific role mobile your initial launch strategy for what I was wrong so far.
Second.
Our targeted.
The credit situation.
Anything else.
Yeah I mean.
The way that we think about targeting again, we look at the rosacea patient concentrations in physicians, we look at predilection for brand versus generic and we we then rank those docs from top to bottom.
So we can have a fairly.
Good at approach you.
This this patient diagnosis.
In a way, where we should see good productivity and we're seeing that already within the we are targeting models predicated on the same philosophy.
And we're seeing that as we are.
I'll walk you through our targeting with our platinum targets, which are our high that's out positions are much more productive.
Than not been our mid tier, which are our gold target and then of course non target those that may be in an office.
Where we have targets than.
They hear detail on empty.
They then also prescribed obviously not same productivity. So we're applying that same philosophy to FMX one of three and we believe that gives us a very focused and efficient way of.
Entering a market.
That's great Thanks, and congratulations again.
Thanks, Jason.
And our next question is from Jason Gerberry from Bank of America. Please proceed with your question.
Hi, Good morning. This is she encore Jason Thanks for taking my questions. Just a couple it on the FCB why no five given near term dogs backstage I'm curious whats your expectation on the phase two data.
I guess as it pertains to the safety and efficacy profile compared to and seek and against the second question would be I'm just talk about how you.
Thinking up all your cost structure, reducing <unk> R&D activities excuse me as does that does that in any way impact the development on why no five if the face to data supporting thank you.
Yes, actually so actually do you want to five the it's our first combination product that they can important.
Point to offer is as you know.
Developing a topical minocycline was a challenging exercise we're proud of being the first company efforts to develop a topicals.
And second generation tetracycline product minocycline, and doxycycline no one's ever been able to do this before until we did it within zig.
This is unstable molecule minocycline. So we were thrilled to be able to do that were minocycline.
Equally as important as it was also a quite a challenge to develop a combination product with minocycline and took quite a bit of time and it's a credit to the development team that we have in the organization. So it's really taking what we believe is the gold standard and the treatment of an inflammatory acne minocycline and with a goal Stan for treating coming.
Don't know acne, which is the dabbling so weve a we have a a stable product cosmetically appealing that so now is underway in a phase two study it's fairly substantial phase two study its 400 patients split across four arms 125 patients in the combination arm.
3% minocycline, 0.3% adapt billing 100 patients in each of the Mone add ons to 75 patients in the vehicle will obviously be looking at the efficacy as well as.
Safety.
The the bar obviously for this phase two is versus vehicle.
But we want to measured against each of the individual constituents, depending on what a phase three program would have to look like.
So in terms of comparing with Ams Zika.
I would not comment that she on expectations. So we actually see the data obviously, we have we have.
Expectations and meaningful expectation for this product in that and I've said all record that if approved the market it could.
Be the biggest product that data we would have for this particular category.
Dermatologists they they have they do use combination products, a fair amount and again, we believe it could address unmet needs for patients and health care providers.
But I hesitate on providing any competitors danzig et cetera, or any other product going to mark until we get the results I think from there again, we anticipate having the read outs sometime this quarter from there we would obviously assuming success, we would schedule and end of phase two meeting that'll take a little bit of time, they get that scheduled.
And then from there depending on the results than we could look to move towards a phase three program pressing you want to five but I would not envision that study taking place certainly until sometime next year, probably earlier part of next year I kind of goes to the costs expenditures for the balance of two.
2020, our focus is squarely on the launch of MZ can and what we hope to be an approval and launch for FMX one of three.
There's not a lot of large clinical activities for organization over the course of the next.
A couple of quarters, that's just a function of timing and a function of the normal progress of completing a trial getting in front of the FDA and and beginning to establish.
What the next trial would would look like so there's no rush for us to do this we want to make sure that we.
We take appropriate timing get in front of the FDA review the data.
And then go from there in the meantime, again, we're going to keep our costs squarely focused on the launch of engines and FMX, one or three assuming approved.
Which has always been our focus for some time I'll turn it to Andrew to have any additional thoughts or color.
No I think you covered a Dave I don't have anything to add on.
Actually I may be just a quick follow up on the Opex for one how much of that total as onetime time, we're incurring cost post the merger.
Just some color to that but if you can provide that again that would be great. Thanks, Yeah sure G.. So there was 11.7 million and onetime expenses.
They broke down there were 3.8 million, mainly severance actually all severance in research and development and then 7.9 million in SDMA and that broke down to 4.3 7000 3.6 other.
In addition, she there were about $9 million of expenses the recorded on the Menlo side.
In the period between January 1st and the merger date, the don't show up obviously on the financials, but they would show up in cash and then some of them would show up an accrued liabilities on the balance sheet right. If the sums weren't paid so total amount was 21 for the quarter, but only 11.7 ran through our PNM.
Got it thank you.
Sure.
Our next question is from Patrick those out from Lifesize capital. Please proceed with your question.
Hi, everyone from Valentina on for Patrick Thanks for taking your question on just a couple more action do you want outside on given the positive read out what might the pivotal program look like for asking do you want to five just in terms of patient numbers and the primary endpoint.
What do you anticipate that timeframe to ensure that duration as well the drug discovery theater cost.
And maybe if you could give us more granularity on how you're thinking about the commercial prospects for LCD one of five attitude typically when considering the competing products within the FTC. Thank you.
Thanks, bouncy and I'll talk or share some thoughts on.
Potential structure of the phase three program and I will turn to Matt talked more about the commercial opportunity around it.
In short the size of phase III studies going to depend on the results of the phase two so tough for me to give you any.
You know concrete.
Numbers around what that will look like.
What we do envision knows that would be two.
Phase three studies.
Double blind vehicle controlled similar to what we've done to pass up for our clinical programs with an zeke as well as FMX, one or three obviously, we have a lot of experience and knowing how to run clinical trials in the derm category, especially for a trial such as these.
So we would it would be two phase three studies plus a long term safety extension similar to what we have done also for FMX, one or three and seek we'd have the requisite human dermis safety studies, which we could run in parallel so normally yeah and our normal.
Environment again, assuming yeah. We're we're not an shut down scenario has as much of the country still is.
If we generally think somewhere in a range of 20 months or so all in from first patient enrolled until long term safety completed somewhere in that range. We would anticipate that would go through that a normal.
You know 18 to 20 months or so then it would go three normal filing.
And again likely a a 10 month review on that so.
It gives you a sense of the duration.
Have a clinical program.
Again, we would not envision kicking off a phase three program.
Yes by the end of this year just based on timing by the time again, we get the read out of this space to get in front of.
The FDA front end of phase two meeting star mapping out what a phase three program it looked like et cetera.
I hope that helps and then I'll I'll turn it to.
Matt for some thoughts on the opportunity of the brand itself.
Of the product so Matt.
Sure so.
It's still a bit early because we don't have to read out but this is obviously a very big market and we believe that the combination of minocycline DAP Wayne.
It's a very novel product, one that would be desires bybee.
Missions, we will have established ourselves in the market by the time. This will launch a we'd have pretty good knowledge of where minocycline as being.
Preferentially used in these patients as well as the dabbling for that matter.
And so we think that it's a good market opportunity, it's still premature on kind of defining it could go to market strategy.
Not knowing the phase two data, but we're optimistic.
Great. That's helpful. Thank you.
And once again as a reminder, if you have any questions you May press star one telephone keypad.
Our next question from on Retina H.C. Wainwright. Please proceed with your question.
Yeah. Thanks for taking my questions I've a couple I'm just if you don't mind I I understand your wait until you have some more clarity on some of these contracts a upcoming with managed care before yet give us guidance on value per script, but.
For now the math works out to like under 100 Bucks, a script and acutely at least and so can you just help us understand what are these sort of belkin, maybe around like the best case worst case for potential normalized gross to nets and maybe also some color on how what percentage of your current volume that we're still.
Being come through Ikea is coming from Friedrich Thanks, I'm Carla.
Now on so yes, as we said the in the past that the view from the payers is that their expectation is a net price to plan to be somewhere between 200 $400 at units. That's always been the assumption that we've operated within and and that's our goal ultimately went all the shakes out to be somewhere in that range. Its.
At this stage, that's that's wearable won't stay in terms of providing any color around this obviously as you can appreciate within the first couple of months of launch why we're engaged with payers to get under contract. Our data out there now conversion program will take up a larger share up the volume than what ultimately will be.
The case once were under contract our objective is always been to partner with payers as opposed to going around.
Payers.
A lot other companies use these coupon programs in perpetuity.
That is not our intent we believe as as Dan Route line, we're not going to give the product away. We believe we have excellent product and we believe we've got to a very good pricing strategy and a good price point.
Our objective is to get contracts wrapped up as we go into the third quarter with the major major payers on once that's done we're going to shut off the the the denial conversion program.
Understanding that there will be some patients that they may not get access to the product because it's not covered under formulary, but our intent is to have the vast vast majority of plans cover our product. So that'll certainly improve the gross to net that's also why we're not providing any guidance as you can appreciate right now because we're still on this transition period.
But coming back to your fundamental question of where we anticipate the land that two to $400 range has always been our focus in and what we intend to to lock in on so.
I'll stop there to see if there's any additional questions.
That's helpful. Thanks, and I guess you did mention some states are opening up you've got some reps and those offices, so presumably they're getting some feedback from those docs and what are we seeing if anything yet I know it's early on actual acne patients coming back into the offices I think last quarter I ask you could talk it back to school season.
Could be hitting if that would hit you guys need that you know not everybody is only getting their treatment because of back to school. So if that's not the case hopefully we're seeing some patients already coming into the offices is that the case.
Yeah. So the so the data that we would use to help determine that we're still not necessarily seen that in the data we saw the indirect.
For branded prescription.
We saw the indirect volume declined by about 40% or so getting the covert 19 shutdown.
We would anticipate that as physicians start to open their offices. They are going to start to see more acting patients. Now. This is still you know in a magnitude of 50000, plus and Rx is per week.
Just down from the mid 70000.
Back before the covert 19 shutdown. So there are a lot of patients out there.
The physicians, who are opening up I believe that they have a backlog of patients that are working through and so you'd expect that acne patients would be among those.
Anecdotally, we are hearing that patients are coming back across the spectrum.
What are the things that we saw during.
The last few weeks of of data, which I think it's interesting is that if you look at share shifting between different drugs in the ACMI space you see a share shift toward the I'd, probably no ones, which means that the most severe patients.
We are getting treated.
That doesn't mean that there were other actually prescriptions being ops prescribed and other acting brands being prescribed and we saw that clearly we added 500 unique prescribers framed the over that period. So there is a.
There is a pod rio positioned to not only our prescribing branded products, but also taking up a trial frenzy.
After the first time.
So we think that the opening up a physician offices is a good thing because.
With that comes all the patients that may have been backlog for a period of time.
And we'll know more with real data probably in a couple of weeks.
Okay or not offer some of this additional thoughts I got I think it goes to the the efforts of our our commercial team and our Salesforce.
As we've said all in this current environment, although the aggregate number of calls maybe less than what a normal salesforce would experience in a face to face environments.
The.
The feedback that we've got and what we've seen is that the duration and quality of the calls.
Has increased and so we're seeing environments that in a norm our position offsetting normal environment may or may be challenging to gets a lot of face time with that particular practice busy practice navigating through waiting room.
Navigate through the office protocol they get time.
Can be challenging at and we know that that for any commercial company in any therapeutic category Derms not.
And just from that so what we are seeing is the team taking advantage of.
This particular time period and getting good quality time with.
With the AC piece and so it's not unlike what we're doing right now if you get that healthcare provider there were virtual call, whether its space time or or the like or a virtual speaker event.
You have a captive audience you're engaged in that time may go from.
In a normal face to face environment five to eight minutes that 10 minutes for call to double or more than that so.
So that's enabled our team to have very good quality discussions and educational discussions about the features and benefits of our product for their patients.
Within that as you offices continue to open up.
Yes, they obviously have an awareness of our product in an increase awareness I think thats reflected in and the fact that has not outline we've seen over 500, new unique prescribers that have tried the drug have have prescribed them zinc. Despite this current environment. So our hope is that that serves as well as offices continued.
To open up I hope that provides additional color.
Yeah. Thanks appreciate it.
Got it.
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And we have reached the end of the question and answers sensor and I'll now turn the call over to management for closing remarks.
Yes. Thank you operator, and again, thanks, everyone for taking time out of your busy schedules to listen to our cost. We look forward to providing you with continued updates as our business progresses, and and then meantime, Iowa, we on behalf of the company, which everyone.
The best stay wells, they say from a board of talking with you soon thank you.
Okay.
This concludes today's conference and you may disconnect your lines at this time thinking like situation.