Q2 2020 Horizon Therapeutics PLC Earnings Call
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Ladies and gentlemen, today's topic is scheduled to begin shortly please continue to standby thinking for your patience.
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Welcome to the Horizon therapeutic plc second quarter 2020 earnings conference call.
As a reminder, today's conference call is being recorded.
I would now like to do.
10 of them for senior Vice President Investor Relations.
Thank you Sarah good morning, everyone and thank you for joining us.
On the call with me today, or Tim Walbert, Chairman, President and Chief Executive Officer lose Thomson Group, Vice President clinical development and external search <unk> Executive Vice President Chief Financial Officer Spectrum, Kern County, Executive Vice President and President International.
Andy Pasternak Executive Vice President Chief Strategy Officer.
Tim will provide a high level review of the business or second quarter performance in our full year guidance that we increase this morning.
Lives will then provide a review of our R&D programs, followed by Paul will discuss our financial performance in guidance in more detail.
For closing remarks from him well take your questions.
As a reminder, during today's call will be making certain forward looking statements, including statements about financial projection or business strategy and the expected timing impact of future events.
Our actual results could differ materially due to a number of factors, including the extent in duration of the effects of coking 19, as well as other factors outlined in our latest forms 10-K, 10-Q and any it kills but 8-K filed with the Securities and Exchange Commission.
You are cautioned not to place undue reliance on these forward looking statements and horizon disclaim any obligation to update such statements.
In addition on today's conference call all non-GAAP financial measures will be used these non-GAAP financial measures are reconciled with a comparable GAAP financial measures in our earnings press release.
And other filings from today that are available on our investor website at Www Dot horizon Therapeutics Dot com.
I will now turn the call over to Tim.
Thank you Tina good morning, everyone.
The delivered fantastic results this quarter driven by the continued outperformance [laughter] or medicine, we launched earlier this year for third eye disease or <unk>.
We continue to hear more stakeholders that 'cause, it's maybe a significant critical need for so many patients who've gone years without any empty approved toxins.
This is painful and business threatening rare autoimmune disease.
[noise] based on the significant that's a demand.
Increasing or full year 2020 to present, it feels good to more than $650 million.
Stansell increasingly garnered some more than $200 million, we announced last quarter.
Additionally, based on the faster uptake, we're seeing for the medicine as well as its broad indication, we're raising our to passed the peak U.S. annual net sales estimates more than $3 billion.
Driven by competitors. We're also increasing your 2020 total company net sales guidance by more than 30% to $1.85 billion to $1.9 billion.
We're also raising your adjusted EBITDA guidance by approximately 60%.
$725 million to $775 million.
For perspective, or updated 2020 guide is now in line with with what sell side analysts expect for net sales and adjusted EBITDA next year in 2021.
We're now realizing margin expansion of full year ahead of schedule.
The midpoint of our adjusted EBIT Guy EBITDA guidance represents 40% of net sales a full three percentage point increase versus last year.
We expect continued margin expansion of the next several years driven by the continued growth of comparison and KRYSTEXXA.
Our success as a testament to the value for unique bio pharma model, where the cash that we have generated from our legacy business allowed us to significantly in best first in the relaunch of KRYSTEXXA and the success of Crystex has allowed us to ultimately invest through the launch cousins.
We continued strong performance of both Crystex <unk> and it depends a will provide us with the past the builder clinical development pipeline to generate growth in the years ahead.
Importantly, we recently achieved several key clinical development milestones.
We announced new topline prepares the data underscoring its efficacy in longer disease duration, it's long terms, the bill durability and potential for re treatment.
We accelerated the started work to present trial and chronic or an active TB.
Through year end 2020.
We reached target enrollment in our mirror Crystex Immunomodulation randomized control trial with topline data expected in the first half of next year.
And we presented Nucryst starts to Eminem modulations data you lore reinforcing the much higher response rate that has been observed when crystex is used within immunomodulation agent compared to Crystex alone.
We also continued to execute on our capital allocation strategy, completing the extinguishment of all $400 million or bar exchangeable senior notes this week.
Our efforts since the beginning of 2019 have never do start gross debt by approximately $1 billion.
The same time, we've maintained a strong cash balance transact on pipeline assets in rare diseases, and our therapeutic areas of focus.
Our acquisition drilling second quarter of VCM eight to five development candidate for some scleroderma. An example of our business development strategy at work.
Well not a recap our second quarter results.
And our orphans segment year over year sales.
Growth up 87% was driven by pezza as well as continued growth of our other rare disease medicine.
Our orphans segment net sales now represent more than 80% of our total company net sales I'm just going the rapid transformation, we have made through rare disease bio pharma company.
Compared this is turning out to be one of the most successful rare disease medicine launches ever.
Second quarter net sales of $166 million significantly exceeded expectations.
As we noted last quarter three factors are driving this outperformance.
First the severity of Phoebe and it's painful progressive vision threatening symptoms, it's a highly motivating factor for patients to seek out therapy, particularly when the medicine generated impressive 83% response rate and its clinical program and is generally well tolerated.
Second the pre launch efforts we began in early 2009 team have been highly successful and developing the market educating key stakeholders on PD into pezza, and establishing and simplifying the TV patient journey.
We're seeing strong awareness among treating physicians and strong support from advocacy as well as patient group.
And third outstanding commercial execution, which has driven faster than expected uptake of to present in the market.
In fact market research we conducted in June demonstrates that are pre launch efforts and commercial execution of led through high awareness and favorable perceptions of the pezza among our target physicians.
Awareness of depends there's no more than 90% up from about 60% in may of last year.
In addition, approximately 95% of target physicians have a favorable perception of the present.
At this point less than 50% of our target physicians have prescribed supposed to be highlighting the significant growth opportunity we have from moving forward.
Additionally, but have the physicians, who have not yet prescribes the pezza per claim to have delayed prescribing through to covert Nancy.
This underscores fighter dramatics assess the impact that cobot night team has had on the loan.
Despite the fact that up them all just separate among the most impacted physician specialties during covert 19.
As a demand continues to grow.
Our field seemed quickly adapted to this new environment in a successfully engaging with key positions. Both in person in virtually we're pleased that we have seen minimal disruptions to patients who started therapy.
As we discussed last quarter, if they're very rapid growth in February and March new patient enrollment forms or pass slowed in April may due to covert 19.
So our leading indicator of demand.
Beginning in late May However, we start to see rebounded volume, which gives us confidence to the uptake has as this year and moving forward.
We saw continued strong patient growth with more than 1000 patients on has at June thirtyth.
We continue to see a positive overall access environment, which is underscored by the number of patients already on therapy.
Payers understand the value of capacity and policies are now in place for 90% of covered lives with favorable policies for approximately 75% of those covered lives.
We've also received our permanent J code in July which would go into effect on October Onest will help streamline the reimbursement process for many payers.
As expected our payer mix is continuing to shift more to commercial patients, which now represent more than half of the patients on to pezza.
We also continue to see that CGD patients are highly motivated to seek treatment.
Based on these learnings we've initiated a direct to consumer campaign to drive TDD awareness and encouraged patients to go to their doctors office to seek treatment for TV.
And to learn more about the TBD.
Experience from patient advocacy organizations and positions, we're learning that supposes actually changing the way positions think about this disease.
It is disrupting long held notions of treating TV that have been places to 1950.
As we've discussed before until to Pezza surgery is generally the only option for treating patients in the by product fees or what we are now calling the chronic phase of CD.
Positions are beginning to use the person these chronic patients rather than up in for surgery or using to pick the first with the goal to reduce the complexity or number surgeries for their patients.
The stories, we hear from patients continue to make us extremely proud.
One patient was suffering from chronic TDV for four years and participate as I tried steroids radiation and decompression surgery.
Without really be any pressure or.
The ongoing.
Team would frequently come and go and worsen which moved products.
Shortly after beginning Trueblue supposition finally had relief from those years of pain.
In June.
We also saw the first what we hope for many published case report detailing the success of the peasant and Trinet chronic.
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Dr., Bob the corn from these CSD San Diego.
Obviously case support discriminate ongoing results of one of its chronic CGD patients treated with the president and was published in the American Journal above promoted.
After three infusions as patients achieved a six millimeter reduction and practices our IPO thing in both sides.
Results like these are generating strong interest and surpassed the for the treatment of chronic TB, which is one reason we accelerated the initiation of our chronic trial to year end.
We estimate the addressable chronic TV patient population to be approximately 70000 patients.
Based on an estimate of PV patients where between three in eight years since diagnosis.
We anticipate uptake of to present, both the chronic inactive for acute patient population to drive our more than 3 billion dollar Pete US annual net sales estimate an increase to our most recent estimate of greater than $1 billion.
With respect to we generated net sales of $75 million inline with our expectations for the quarter.
We're on track for our full year 2020 expectations, achieving similar net sales of perspective, as 2019 and expect a return to growth in 2021.
We continue to see rheumatologist being one of the specialties most impacted by cope with 19.
As rheumatology patients tend to be immuno compromised and more at risk.
And many of them have been hesitant to leave their homes the business or physician.
We are encouraged to see some patients beginning to return to the physician offices.
Moving forward, what we continue to monitor the impact of Cobot 19 at this point, we remain confident in our guidance.
Our current focused.
With Crystex encompasses three areas.
First of working through the patient centered deferred demand funnel.
Second generating new patient demand before rheumatologist and Nephrologists.
And finally educating physicians on the potential benefits of Crystex of plus Immunomodulation.
But the six Immunomodulation strategy continues to be of high interest to treating physicians.
Particularly fond of multiple data presentations at the European League is rheumatism Congress for new lower than June.
This will discuss the Crystex immunomodulation data in more detail shortly.
To summarize the response rates using Chris sector with several several different immunomodulators ranged between 70 and 100%.
As we noted last quarter, our market research showed that 75% of physicians using crystex.
Remain interested in Immunomodulation, despite cobot 19.
We're also conducting a randomized controlled trial called mere sending crystex it with methotrexate and we reached target enrollment in July.
We look forward to sharing topline data in the first half of next year.
There continues to be a significant unmet need for the more than 100000 patients were not being treated for the chronic and painful on controlled go.
We remain highly confident our peak USA annual net sales estimate for CRE sector of more than $1 billion.
With our rare disease medicine, we generated durable growth again this quarter.
Combined active shipping patients increased mid single digits year over year.
We continued to see high rates of compliance and adherence.
In April.
We launched purposes, we delayed release world renewals Impactive after receiving FDA approval in February.
We developed this new dosage form based on feedback from Cystinosis community.
The granules help improve the proceeds we experienced for patient overcoming pill burden or swallowing challenges two factors that have been nodes in that patient adherence to the mix.
We have seen patients were up therapy for from six months for as long as six years restart treatment with recently.
I'll now turn the call over to list for an update on our R&D program.
Yes.
Thank you, Tim and good morning, everyone.
We made continued progress in the second quarter with our R&D program.
Lastly, we announced topline results from the optic X extension trial and the optics 48 week all treatment follow up period.
Okay.
Reached target enrollment in our Mira Immunomodulation trial and are now and later than 50% enrollment in our protects trial in kidney transplant patients.
Although progress or other deposit increased EXL trial, including our two pivotal trial in chronic TDD, our typical subcutaneous administration program.
Thank you guys exploratory trial in a sense at Florida, and our first excess shorter infusion duration trial.
Each trial is evaluating ways to further maximized, while these medicines for patients.
We remain on track to initiate a phase Twob study with HC two sites in a sense of scleroderma early in 2021.
Let me begin with the new top line to present data we shared last week.
Three clinical program had when you can pull that off.
Optics initial 24 week placebo controlled period.
48 week, all treatment follow up period, and an open label extension trial called off again.
We announced last week topline results of altogether.
Well as result of a 14 week off treatment follow up here, it's a lot.
The results provide further data regarding the dramatic efficacy.
In patients with long into the duration.
Longer term durability and the potential for the treatment.
We discuss in detail on an investor call last Friday with Dr Grade.
The primary investigator the optic and optic ex trials.
To summarize the data.
All of the object placebo patients who participated in Africa were treated with their first force in Japan.
The 9% achieved a clinically significant production cost reduction of two millimeters or greater by week 24.
Compared to the 83% response rate demonstrated in the state optics.
Importantly, patients and often time longer disease duration, an average at 12 months compared to six months for patients in the optic trial.
Only five patients did not achieve a top 10 cents response after a full course, which has an uptick reflecting the strong initial treatment recall.
These were impressed that two patients.
Achieved a reduction in top totaled two millimeters or greater after second question.
Again.
Moving to durability and 48 week follow up period showed that the majority of object has a responder maintain their response at week 17, nearly a year off treatment.
And notably as a small number of object of hesitation to we lapped during the 40, we fall period more than 60% experienced at least at Chino meter reduction in propco with an additional course in 2000 and altogether.
Importantly, there were no new safety concerns.
As a 14 week follow up period or enough to get during which patients receive additional capacity treatment.
We look forward to presenting additional detailed data for both studies at future medical meeting.
Continuing with to Teva, we previously talked about our plan study in patients will be on the active or acute phase.
Before I discuss further however, it is worth taking a moment to reflect on what Tim mentioned earlier, specifically the ways that the introduction that you've had the change in understanding of TD and also the terminology is to describe it.
The terminology used to date to describe the phases of TV active and inactive evolve largely based on the treatments that had been available historically.
The focus is active stays within alleviating signs and symptoms of inflammation, because there were no medication to treat practices in default.
Focus in the in active phase with using surgical intervention to reduce proposal, which is only done in the inactive days when the chances inducing inflammatory floor Apple wall.
So whether even after the active stage many patients continue to present with many of the same center still well above normal level.
And that can have a debilitating impact on the patient quality of life.
After discussions with TD key opinion leaders, there's growing consensus that it's more appropriate to describe the stays characterized by changing signs and symptoms.
Thank you the disease.
The period after which the symptoms are no longer noted today, changing but still persist as the chronic stage disease. We will therefore be using these descriptors going forward.
Typically works I, specifically targeting blocking the IMF one receptor to produce muscle of that tissue behind the API tool profit.
Yes.
I just want to ours still present this heightened levels of normal fibroblasts achieved from surgical sample in patients in the chronic phase the disease.
And in fact, hi, Jeff one or inhibition appears to impact multiple aspects that drive disease in the acute phase and continue to be relevant electronically.
Evidence is building that supports the use of to pezza in chronic TD.
Well the to present prescribing information is broad and intended for all patients with PD. The objective of our team has a trial in chronic TD and to generate data in this specific population to better inform physicians, who may wish to use the medicine that their patients.
We're planning to begin the study in this population by year end.
We expect to focus on the types of symptoms persistence in the chronic TV population such as top 10 cents at Topia and pain and on patients who have had at least a year without all the time or progression.
Yes.
Work is well underway on our two other to present trial.
Continue to expect to start both the exploratory trial in diffuse cutaneous systemic sclerosis.
And the pharmacokinetic trial to explore the potential for subcutaneous dosing. Its pezza later this year.
Moving to Chris Exa, well, we continue to make great progress in our efforts to maximize the benefits of this exit can offer to patients with uncontrolled gout.
First we presented multiple studies and datasets on use of Crystex and with Immunomodulators at the EULAR meeting in June.
Chris exit phase three program, which evaluated for sector alone demonstrated a 42% response rate.
Well impressive in this patient population significant opportunity exists to improve the number of complete responders and the duration of personnel.
So the goal with Immunomodulation Intel dampen the immune response to KRYSTEXXA and thereby increase the patient response rate, allowing more patients to complete a full course of therapy.
And the data presented at you are promising well reported response rates and 70% Annabel.
Those data were with Methotrexate, one was our mirror open label trial, the precursor to our ongoing your randomized controlled trial will love into 14 or 79% of patients.
Demonstrated a complete response nearly double the 42% response rate and with respect to phase three trial.
Well not detract stated the gold standard Immunomodulator, particularly for Rheumatologists.
It's important that physicians has the flexibility to select from arranged option.
Individual patients circumstances couldn't make different immunomodulators more appropriate.
And so in addition to the expanding data and methotrexate, we're very pleased to see presentations of data you are on other nita modulators use with respect.
Oh positive results that appear consistent with the results reported to date using methotrexate.
One of the K series, and 10 patients using looks for them.
Demonstrated a 70% response rate when you concomitantly with Chris sector.
And last quarter, we mentioned the recipe trial assessing microsatellite long tail or and then.
Which showed positive results consistent with previously reported open label studies in perspective.
These data at the increasing body of clinical and real world evidence supporting the Immunomodulation approach with Percepta and it's notable that the total number of patients in published studies that will be modulation.
Approximates the number Chris desiccation phase three trial.
We'll be further adding to the clinical data for Immunomodulation with our randomized placebo controlled near trial.
Evaluating the efficacy and safety of the concomitant use Chris sector with methotrexate to increase the response rate of KRYSTEXXA.
In July we reached target enrollment of 135 patients for this trial with the final number who will randomizing the trial likely to slightly exceed the initial target.
We expect topline results in the first half 2021.
Regarding our other protect the trials, we are now at greater than 50% enrollment and protect our trial evaluating these crystex in kidney transplant patients with uncontrolled gout.
Also remain on track to initiate our perspective shorter infusion duration trial in the second half of this year.
Finally, I will discuss HC, an 85, our newest pipeline candidate.
See any to size is an oral selective l. horrible and antagonists early clinical signals and benefit indices cutaneous systemic sclerosis aware chronic auto immune disease, no ft approved therapies and a high unmet need.
This is a rare disease with an approximately 30000 patient population.
The diseases marked by fibrosis or skin thickening and have high morbidity and mortality rate.
The current treatment approaches are focused on providing organ specific release of symptoms will also attempting to slow disease progression.
Positive signals were observed with HC any to five and an eight week placebo controlled phase two a study.
Well It continued improvement noted in 16 week open label extension period.
However, the timeframe with too short to show statistically significant clinical benefit.
And suggests that longer duration of treatment may demonstrate meaningful benefit in the patient population.
We're working with the FDA to finalize the phase to the pivotal trial protocol, we'd expect the trial designed to be one year in duration with HCR, Chris is an important endpoint.
Also focus on individual components of aircraft.
We plan to begin the trial in the first half 2021.
In summary, we've made substantial strides through the second quarter to maximize the value of our medicine and bring our pipeline forward and with that I'll now turn the call over to talk.
Thanks laws.
My comments. This morning will primarily focus on our non-GAAP results unless otherwise noted.
Second quarter net sales were $463 million and adjusted EBITDA was $191 million or 41% of net sales significantly exceeding expectations and driven by our strong about sales performance.
Our orphan segment generated net sales of $375 million a year over year increase of 87%.
Driven by the strong performance of deposit and reflected.
Orphan segment operating income was $152 million represent a margin of 40%.
Net sales for the inflammation segment were $84 million was segment operating income of $38 million.
We continue to reinvest the cash flow generated from this segment into our key growth drivers deposit increased oxide and our pipeline.
Our non-GAAP second quarter gross profit ratio was 88% I'm not sales.
Non-GAAP operating expenses were $220 million.
This included GAAP R&D expense of $28 million and non-GAAP EPS DNA expense of $192 million.
Non-GAAP income tax expense in the second quarter was $94 million.
We were impacted by an unusually high non-GAAP tax rate in the quarter.
As we've seen in prior years, there can be variability in the tax rate across quarters, and we expect a third and fourth quarter tax rate to offset the second quarter rates to bring the full year inline with our expectations of low double digits.
Non-GAAP net income was $84 million and non-GAAP diluted earnings per share were 40 subs.
Weighted average shares outstanding used to calculate second quarter 2020, non-GAAP diluted EPS was 215 million shares.
As of June Thirtyth cash and cash equivalents were $718 million, which is impressive as it reflects the investments of $157 billion. We made in the second quarter to acquire Christiane and certain deposit milestones and royalties.
Our non-GAAP operating cash flow for the second quarter was $100 million, which reflects less than $20 million from cash receipts to date from typical sales.
As an infusion medicine, and because we expect the delays and reimbursement during the launch we provided to public customers with extended terms that will begin with declined following the expected implementation of our permanent J code on October Onest.
We anticipate an increase in operating cash flow generation in the second half of 2020 and in particular, the fourth quarter as collections at the positive receivables increased significantly.
At June Thirtyth, our net debt to last 12 month adjusted EBITDA leverage ratio was 0.9 times.
As of August 3rd all $400 million of our 2.5% exchangeable notes due 2022 were fully extinguish the exchanges for ordinary shares or cash redemption.
Looking further improvements to our balance sheet and capital structure.
The total principal amount of our debt today is $1.018 billion with the earliest maturity in 2026, we.
We have lowered our interest expense as a result of several capital structure improvement efforts made since the beginning of 2019 and there are no maintenance covenants on our job.
Our balance sheet is strong.
We are confident in our ability to generate operating cash flow, allowing us to pursue further pipeline assets as a top priority.
This morning, we announced that we are increasing the full year 2020, net sales guidance range to $1.85 billion to $1.9 billion for 1.4 to 1.4 or $5 billion reflected an increase in the full year 2020 to puzzle that sales guidance to more than $650 million.
Following its exceptional performance.
We're also increasing our adjusted EBITDA guidance range to $725 million to $775 million from $450 million to $500 million at the mid points.
Adjusted EBITDA would be 40% of that sales and would reflect an acceleration of our margin expansion a full year ahead of plans.
Our updated guidance represents year over year growth in net sales and adjusted EBITDA of 44% and 55% respectively at the Midpoints.
Our 2020 guidance reflects our best estimate of the impact of Cobot 19, and assumed he will continue to see some level of rolling shutdowns across the United States.
We continue to expect Chris success full year 2020, net sales to be in the range of 29 team that sales.
For our rare disease business unit, we continue to expect limited disruption you covered 19 and full year net sales growth in the low to mid single digits.
For our inflammation segment, we expect both third and fourth quarter net sales to be in a similar range as the second quarter.
Moving onto our full year expectations for the rest of the income statement.
Our non-GAAP gross profit ratio is now expected to be between 87 at 88%.
This is primarily due to the impact of royalties associated with significantly higher net sales expectations for coupled with issue.
We expect full year 2020, non-GAAP operating expenses to increase compared to our prior expectations.
This is driven by additional SGN expense to support our increased that sales expectations and continued investment in our R&D programs.
While we expect R&D spending to be higher in dollars than previous estimates given our significant increase in net sales guidance. We now expect our non-GAAP R&D expense as a percentage of net sales to be in the mid to high single digits for 2020.
Following the extinguishment of our 2.5% exchangeable notes, we now expect full year non-GAAP that she's expense to be approximately $45 million.
For our tax rate, we now expect a full year non-GAAP tax rate in the low double digits.
As I mentioned earlier and as we have seen before we're seeing some variability in our non-GAAP tax rate on a quarterly basis, we anticipate a tax benefit resulting in a negative non-GAAP tax rate in the second half of the year to bring the full year rate inline with our expectations.
Our 2020 cash tax rate is now projected to be in the low to mid single digits.
Given our recent share price appreciation and its effect on the calculation of the weighted average diluted share count under the Treasury stock about them. We now expect our third and fourth quarter weighted average diluted share count to be approximately 220 million shares.
With that I'll turn it over to Tom for his concluding remarks.
Thank you Paul.
The second quarter was one of significant growth demonstrating our strong ability to execute.
We substantially increase or full year 2020, net sales and adjusted EBITDA guidance, which represents an acceleration of our margin expansion plans a full year ahead of schedule.
Compares it continues to generate outstanding results on track to be one of the most successful rare disease medicine launches ever.
Given this strong performance, we increased our peak USA and unit sales estimate to more than $3 billion.
Finally, we continue to improve our capital structure for the reducing or gross debt funding extinguishment of our exchangeable senior notes, while also maintaining a strong cash spills. Despite investments made during the quarter.
Today Horizon is merge is one of the fastest growing biopharma companies among our peers with an industry leading growth profile on both the top and bottom line we.
We believe this is deserving of a higher multiple we're well positioned to continue deliver increasing value to our shareholders now and over the years ahead with that we'll open it up for questions Tina.
Sorry go ahead.
Thank you to ask a question really the press Star then one on your telephone to withdraw your question. Please press the pound tool.
Our first question comes on the line of David Amsellem with Piper Sandler.
Your line is now open.
[noise], Thanks, and very impressive results few questions on supplies, a so I'm interested in that kind of five broderick chronic patients who have been getting the drug is there a duration.
Fibrosis range that predominates is there also evidence that patients with longer standing fibrosis say more than five years are benefiting from treatment interested in what you're hearing from the field.
Well Youre thing it's still early.
Yes. Good question on and then just real quick on duration of treatment I know, it's early days, but what are you hearing about physician intentions to treat for longer than six months in particularly severely active patients.
Great. Thanks, David I appreciate the questions as far as duration of treatment, we have not heard of any patients going longer than six months at this point in time.
It's still early launch, but we've not heard that that feedback is yet and looking at the chronic patient.
In our estimate of 70000 patients we're estimating patients who've been diagnosed three to eight years and that's the predominance of what we've heard from the treating community. We have heard stories of patients with over 10 years.
Diagnosis and across this population we have heard us Tim basically similar results to what we saw in the phase three program. So.
We havent seen differences between three 570 or even 10 years at this point again, it's a small population and his list mentioned, we're going to start a chronic trial by year end to get more data there.
But so far it's being used.
It's being reimbursed.
And we're hearing good results from from those positions were using it but it's certainly something we're going to learn a lot more of as we get a more months in quarters since the launch right. Thanks, David There next question. Please.
Thank you Sir our next question comes from the line of Annabel Samimy with Stifel. Your line is now open.
Hi.
Thanks for taking my question congratulation on a sustainable.
So I had a question about that trajectory undeniably incredible can you explain now what this trajectory might look like meaning well you got to the current where you've treated and and quote unquote cure most patients and they start dropping out of the prevalence. So you can see a cat to your estimates or do you expect to try to.
Started exploring some kind of maintenance protocol and then I guess.
And the same different regard given the strong as you if our inhibition is there any expectation to accelerate that's the exploration in scleroderma or you know to present beyond exploration phase. Thanks.
Sure.
Thanks, Annabel appreciate it yes, we're seeing amazing uptake and.
The vast majority of that's been in the acute population, but as I mentioned in the last answer we are seeing a number of patients.
Benefit of had chronic disease.
Just to give a little recap on the market size and what the annual prevalent population and incident population is.
We expect 15 to 20000, new patients with direct I did these each year, so that will be refreshing each year and typically these acute patients have one to three years of active disease.
So anyone who's not treated.
In one year can roll into the next year, so you're going to wind up with the population in excess of 20000, each year coming into the market looking at the chronic population that is 70000 patients. So.
As anyone who is not treated in the first three years that rolls in will continue to enrich the chronic population.
But if we see significant penetration we would expect that 70000.
Populations, who continue to decline.
So same with continued into that population.
Coming into the market each year at 15 to 20000 plus.
And the chronic it really depends on how fast we penetrate that population.
So thanks Annabel.
Next question please Sarah.
Thank you Sir our next question comes on the line of Jason Gerberry with Bank of America. Your line is now open.
Hey, good morning, and also I'll Echo my congrats on the update here. So so my question is just on the has a peak outlook could you give us a sense of the split in that number active versant active I just want to get a sense that you see a open label enacting study does produce favorable beta to what extent there could be upside.
The $3 billion peak number and then just on the I have another question just when I look at the patient number that you talked about versus your sales to sort of revenue capture for patients.
Hi, and so I'm wondering you know your previously disclosed gross to net assumptions or vials per patient assumptions, both seem conservative. So I'm curious if you're seeing upside on either of those parameters. Thank you.
Thanks, Jason.
First from a on the vials per patient and compliance I think all the parameters that we looked at with as I have been performing or actually coming in better than expected. We havent had enough patients go through the full course of treatment to have a true estimate of vials per patient we are seeing.
[laughter] slightly higher weight. So we may wind up with a little more vials per patient, we just don't have enough data to confirm that yet.
It's in compliance has been remarkably good at this point in time.
But again, we have to see once we get.
Larger numbers of patients getting to the full course to determine what that.
If there is a long term increase in the essentially NRP.
Per patient.
Relative to your first question around the the overall forecast that that includes both acute and chronic patients.
We're not breaking it out between the two.
But.
Ultimately.
It's looking at the 3 billion in its really the pace to that 3 billion that I think where there's upside traditionally people looked at five years plus.
So if I look at that number it's more the pace to that 3 billion.
And then again, we just have to see would that data looks like.
As we continue to get more treatment in the chronic population.
Thanks, Jason Sarah next question. Please.
Thank you. Our next question comes from the line of Ken Patio Court with Cowen and company. Your line is now open.
Hey, guys. Congratulations thanks kind of launch just question if you have a sense of.
Actually active versus chronic and treatment now and then in terms of the chronic patient as you learn more about where they may be did you get a sense at theres still seeing clinicians or is there a level of frustration and they fall out of the treatment paradigm. So that your advertising could help store them up and get them out just.
What you're learning about where those patients go and then lastly, how does BD change with the success that you're having just wondering if there's any change in the way you focus if you think of later stage assets or we're going to stick with with what what's got us here and and still looking for the earlier stage assets. Thank you.
Thanks can appreciate the questions on the Beebe our strategy remains the same we're looking at a mid to late stage development stage opportunities in rare diseases and also our therapeutic areas, where we have a presence such as rheumatology nephrology endocrinology and ophthalmology.
So we continue to March down there's a number of assets on a regular basis that we're reviewing and like we did with the it's in the two five and the currency on deal.
We're looking for bolt on development stage.
To build for long term growth of the company.
As far as the chronic patients I think it's a mix some of them do pull out of.
The system a lot of them are being seen by the optimal Justin and or endocrinologists for their great underlying graves disease.
But what we're seeing in these patients have significant pain.
And continuing suffering which they seek treatment for.
So we are finding a most of them are being seen by their positions and when you look at our digital advertising as well as our direct to consumer activities.
We found a just a we ran a pilot early on with a much better than expected results, where patients are really picking action and feedback from physicians directly that patients are coming in asking about new treatments for TV. So we expect to continue.
To accelerate our digital and direct to consumer activities totally educate these patients to one diagnose appear earlier in the course of disease.
Urgently treat to avoid surgery and other debilitating or disfiguring.
Impacts.
And if you had long standing disease that there's still a potential option.
So you need to see your position and take that out so.
We see our promotional effort is being able to get at both of those groups and.
Hopefully continue to accelerate treatment. So thank you thanks Ken.
Your next question please.
Our next question comes from the line of dairy match men with BMO capital markets. Your line is now open.
Hi, Good morning, my congrats as well and the great engagement has that.
So how how big will that open label study in chronic patients be that starting later this year and when could we see data on it since its open label. So it might take out a trickle out potentially over the course in next year.
And then just talk about the infusion network and how that's been growing it seems has been no issues for administration for these patients you doing a really good job with that and also comment on home infusion, if you've been able to even start thinking about that and the cobot environment and how that might play out and help you.
Down the road.
Thanks.
Sure Thanks, Gary and on home infusion Center, we have the single digit percentage of patients are being treated and in certain areas, we're seeing more bit than others, but it is a viable option and we are seeing some physicians utilize it with their patients and and we'd expect overtime is more more comfort.
His gain by both physicians and patients that that that will expand.
With our infusion network, we have done a lot of work in advance of launch.
And subsequent.
Probably have over a thousand infusion centers that are actively certified and involved into position in one way or another and.
That network has has continued to be able to see patients, especially when there's challenges with some clothes. We can quickly find alternative places for them to be into so we have a separate.
Organization in the commercial side that is done a great job of of managing that interface between the infusion center and the patient and making sure that they get to place where they can both start and complete their infusions.
Relative to the chronic trial I think we've guided to 25 or or north of 25 patient population as far as timing I.
I don't know specific timing, but I would I would think.
You're talking about six months or treatment and time to enroll system, probably add up from there I think it is important when you look at how the ophthalmology community.
Typically work abstracts, and the American or case series or case studies in the Mercury about the metallurgy like the Doctor Bobby corn from New CSD published.
Our we're hearing a lot of those are are being submitted and we expect to see over there but coming.
Months and into the spring conferences next year, where physicians are having a lot of individual success with the chronic patients. The publishing that so we think can be a lot of data out in the community that continues to show strong efficacy in that population.
As we finalize the chronic trial will give more information on on the timing of that.
Thanks, Gary Okay. Thanks.
Your next question.
Thank you. Our next question comes on the line of David.
I think there with Morgan Stanley. Your line is now open.
Yes, thanks, very much and 10 Adobe add Mike Hi.
And let me add my congrats as well.
Great to see the phenomenal performance so I have two questions.
The first one kind of follows on a prior question but.
Could you provide a little more perspective on the recent prescribing of have Oh, sorry of to pass up beyond the moderate to severe patient studied in phase three including.
To what degree physicians may be prescribing it in my old active TB and also inactive TBD.
And then second is the lack of a permanent J code constraining current physician prescribing up to pezza or is it simply a cash flow issue for horizon to extend the payment terms temporarily.
Sure Thanks, Dave and it's the latter as Paul went through in his remarks, we did provide as is typically are customary in launches extended terms. So we have a simply high.
Receivables balance Paul and when I'm done can remind us.
With that is.
We haven't seen a significant impact from from the J code at this point in time given.
The broader.
Reimbursement and access that we've had with 90% of plans are covering for peasant over 75% of them being.
With favorable access.
Good to your question and then Paul you can jump in on the.
Receivables.
With depends on the different populations.
In the acute population that we studied which is really the moderate to severe active population that is the vast majority of patients that have been treated when you look at the chronic population I would say that is mid to high single digits. At this point in time, we don't have great data on that but we are seeing a number of patients being treated.
Who fall into that chronic which is the disease diagnosis between three and eight years.
As far as the Mt population that we are we have not studies in that population. We are not marketing for that population. So I don't have any awareness of any news in the mild population at this point in time, Paul do you want to address is first a question around.
Cash flow and when they'll come in.
Yeah, and you know as we mentioned on the on the call. We we collected less than $20 million. It's about the receivables in the second quarter and it's because we would expect yeah, we expected that the positions and customers would have.
You know a delay in getting reimbursed by then so we did provide them extended terms as part of the launch.
We expect those are those terms are automatically dialed in to go back to normal level, starting when we get our permanent J code on October October Onest, and so as a result, as we look in the second half, we expect significantly higher cash flow generation, especially in the fourth quarter, we should see a collection of deposit receivables really ramp up.
Thank you.
Your next question please.
Our next question comes from the line of David Steinberg with Jefferies. Your line is now open.
Thanks, and good morning, and I'm very impressed and execution, a particular ticket pandemic.
So two questions. The first one just building on a prior question.
You mentioned, all metrics to improving including pricing I know the last the initial guidance. You gave was $200000 per course, I know that and that was based on active population I think in your clinical studies. The average patient headed that way, the 74, and a half kilograms and talking to.
A lot of the specialist they mentioned that pipe erotic patients where a lot more do you have any sense.
What the average weight would be four or five radicalization, therefore, how many more.
Files, you might use and then secondly last month and talking to some of the specialists they indicate.
Each of them had a few patients who got step edits.
But they also said that didn't make a lot of sense because.
The product they would attempt to use before it depends that would be steroids, which had been showing 100% of the time not to work. So I was wondering.
Are you, saying a lot of step a show up and if you are well that extended adjudication process.
With the patients than hard question is I know your your updated guidance is solely based on U.S. sale.
And 1 billion close to 3 billion dollar Wes I just wanted to see if you could give us an update on the European opportunity I know in Europe orphan pricing has generally been similar to U.S. pricing.
And and so could you comment on what is the pipe patient population roughly in your in Europe versus the U.S. and secondly, I think you said that you would go to Europe. If you thought you could get orphan status and I was wondering what what where discussions are by that time.
Yes.
Thanks, Dave.
When we look at purpose outside the U.S., we're we're doing our valuation beyond Europe as well within Europe. Vicki you said it well we are continuing to pursue orphan.
Drug designation and continuing dialogue and plan to include both us and international in or post marketing studies. So we expect of continued dialogue and over the coming months, we will indicate plans to potentially go into some other markets with.
Uh huh.
From the standpoint of your question around reimbursement access step edits for for all rare disease medicines.
You are typically going to have step edits, they're always going to check to make sure you had steroids. It's just pretty standard course here in the us.
So.
We are seeing a number of physicians there have their patients.
Get that first step that it have you taken steroids and and looking at how long you've had the disease.
No Thats one of the important thing that we've talked about in the.
The next trial is that we showed patients with an average disease duration of 12 months.
I have an 89%.
Response rate or or improvement in a greater than two millimeter and prop ptosis versus a six month average in our phase three so with more data. We think we'll we'll continue to make that process more timely those step that started both than expected and for the most part we're seeing a patient cycled through and get to.
Their medicine, because the value.
Physicians are seeing for that in their patients.
And then finally relative to your first question Dave.
Around the net price per patient, we did guide to about 200000 launch as I said earlier, we're seeing better compliance.
We are seeing some increase in average vials per patient, but we just don't have enough patients that have had the full courses full course of treatment.
To see that that's going to be higher.
We're seeing average weights that go between 75 and 78 kilograms I don't know that we're seeing a lot of data that shows the chronic compilation is much much greater than.
The acute population, but that's something as we get more data.
We'll understand better and then indicate that down so thank you very much for your questions. Dave. Thanks, David share next question. Please.
Our next question comes from the line of Dana Flanders with Guggenheim. Your line is not okay.
Great. Thank you very much further questions and let me just add my congratulations on the corner and just fantastic launch.
So my first is Tim you are just a full year ahead on margin expansion, which is quite impressive can you talk about just how you think about the margin profile evolving going forward. I know you are investing in R&D in mentioned the DTC campaign, but it just looks like 2021 could just be a very big year for margin.
Expansion given the growth you are seeing into pezza.
Then just a quick follow up and following up on a previous answer.
You provided can you provide just any more details on the interesting investigator sponsored trials in chronic TDD that are out there are there any one is worth highlighting that we should keep our eyes on thank you.
Thanks, Dana as far as margin expansion areas, where we're about a year ahead of our expectations and and as we see continued acceleration of so we expect those margins to continue.
Continue to increase and USANA results.
Adjusted EBITDA growing much faster than the net sales so expect that margin accretion to continue.
Some of that will be offset partially to continue to increase our investment as we do incremental development stage deals, but net of R&D an increased on the investment in transaction Transacted development stage medicine, we expected to continue to see margin expansion into 2000.
It's a 21 and beyond.
Relative to the investigator sponsored studies.
The one we've seen publishes from dr. by the corn and he's been a number calls discussing that we know there's a number of folks that have submitted.
Results of individual patients we've heard.
There's a patients out beyond 10 years getting dramatic benefit as well so we.
We expect to soon in the fall conferences and into the Spring conference is more of that data we don't have.
As they submit that directly.
We don't get the opportunity to see that before published so we have heard that some of that's coming we just don't have.
Them in our hands at this point.
Great. Thanks, Dana I Fair I think we have time for one last question. Please.
Thank you. Our next question comes on the line of Craig Silver Neviah with Goldman Sachs. Your line is now open.
Yes, Thanks for taking my question I'll, let Mike or cost, but I'm, just curious onset pezza and the great growth, you're saying bear.
Can you comment just on current inventory levels, and where do you whether you think inventory levels are in line with what should be expecting on that on a go forward basis.
Sure Chris Thanks for the question in a inventory levels are not generally low less than one month at this point in time.
Thanks, Aaron Brett Thanks.
Great and and thanks, Sara Thanks, everybody for the question that concludes our call. This morning, a replay of this call and webcast will be available in approximately two hours. Thank you so much for joining or.
Ladies and gentlemen, this concludes todays conference call. Thank you for your participation you may now disconnect.
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