Q2 2020 Aerie Pharmaceuticals Inc Earnings Call
[music] good afternoon, ladies and gentlemen, thank you for standing by and welcome to the Ariad Pharmaceuticals second quarter 2020 earnings Conference call. At this time all participants are in a listen only mode. Later, we will conduct a question and answer session and instructions will follow at that time.
Today's conference call will be recorded it is now my pleasure to turn the floor over to Aries director of Investor Relations I mean Vichy. Please go ahead of me.
Thank you Sydney. Good afternoon. Thank you for joining us with US today are Vince Anido, Aries, Chairman and Chief Executive Officer, Tom I guess arrays, President and Chief operating Officer, Rich Rubino, Aeries, Chief Financial Officer, David Honda is Chief Research and development Officer, and John The rocket as General Counsel today's call is also being webcast live on our website investors.
Every pharma dot com and it will be available for replay as indicated in our press release now for forward looking statements and non-GAAP financial measures on this call we will make certain forward looking statements, including statements forecasts and observations regarding our future financial and operating performance impacts of the cobot 19 pandemic and our observations regarding ongoing operating expenses and net revenue per bought.
While these statements will include observations associated with our commercialization of Rhopressa and Roclatan in the United States that they will also include plans and expectations regarding the success timing and cost of our clinical trials. Additionally, we will discuss progress regarding that maintaining requesting or obtaining approvals from regulatory agencies of our products and price.
The candidates, including our strategies and plans with respect to international expansion. Finally, we will address our manufacturing activities and capabilities, our financial liquidity and other statements related to future events. These statements are based on the beliefs and expectations of management as of today, our actual results may differ materially from our expectations.
Investors should read carefully the risks and uncertainties as described in today's press release as well as the risk factors included included in our filings with the SEC, we assume no obligation to revise or update forward looking statements, whether as a result of new information future events or otherwise. Please note that we expect to file our 10-Q Tomorrow. In addition, during this call will be discussing Turner.
Adjusted or non-GAAP financial measures for additional disclosures relating to these non-GAAP financial measures, including a reconciliation to the most directly comparable GAAP measures. Please see today's press release, which is posted on the Investor Relations section of our website with that I will turn the call over to events.
Thanks Ali and good afternoon, everybody and thanks for joining us today and I certainly hope you and your families are staying safe environment.
Thank you back to our first quarter earnings call were dead, probably were shown excellent momentum to that quarter and I'm happy to say that our volumes held up in the second quarter in fact slightly above that first quarter numbers that 232000 units and that's obviously a combination of repression rocket pass our June year to date revenues are up about 44% overlap over prior year in.
Our volume for sure we help a significant increase in payer coverage since the end of the first quarter, particularly with Medicare part D. We now have solid coverage for both of our products are all the market here in the us.
Based on a survey recently completed in fact, it's about three weeks ago, 45% of the eye care professionals offices are running as business as usual with about 30% of the offices have reduced hours at this point offices are seen on average about 75% are the prior patient loads the again prior to the Cogan.
So importantly, while we can't predict which states will open up and close we do see a trend where eye care professionals are finding ways to see more and more of their patients while taking precautions. This is good news for us as well as for patients and doctors of course.
Our net revenue per bottle for the second quarter was just shy of $80 at 78, the big lift is Medicare part D coverage, along with continued penetration of earlier coverage gains that drove the decline in that price when we set expectations earlier in the year you may remember, we did not expect the significant Medicare part D gains.
During the year, including a large payer when that occurred in may very importantly, having coverage for so many Medicare part D. Lives now gives us access to the largest segment of the glaucoma population along with the opportunity as you've seen to continue recent gains and the number of prescriptions that are now for 90 day supply.
Yes.
While it's difficult to predict specific net revenues per bottle our expectations are over the next few quarters that we'd have a majority of coverage across the board. Our net revenue per bottle is expected to be more stable going forward.
In the short term there were certainly potential for continued penetration in Medicare part D coverage.
As we gain and therefore, an associated increase in Medicare part D. As part of our mix do have opportunities to offset any impact and increase in net revenue per bottle over time.
Changing gears briefly before I turn it over to Tom Mitro for further commercial insights I'd like to touch base on some of the other initiatives that we have including.
Our R&D and global expansions and we continue to initiated in the fourth quarter 2020, the phase Twob trial for our drive product candidate.
That we obtained through our late 2019 acquisition of his Rex we met with the FDA in June of this year, we are planning to test to different concentration the product candidate that we're calling a our 1551 too in a highly powered 90 day phase Twob trial with about 360 patients which could potentially.
Turnout.
To be one of the two pivotal trials that we need.
As product candidate is a trip a made agonists as you may remember and it shows great promise for both signs and symptoms I remember this is the cold sensing receptor in the high end. So it's just like when you go out on the coal Windy day in.
In your home town in Europe as soon as you the when hits you in your eyes to your up well that's a receptor we're activating.
For this upcoming trial, which we're calling comet one we expect the primary endpoints to be Okcular discomfort, which of course is symptom and tier production, which is the side as you know the F. Dave requires both as a primary endpoints. We are expecting that were 30 million dry eye suffers in the United States, we could see rapid.
In both enrollment in the program, we are targeting a topline readout for the third quarter of 2021.
For Japan, as we mentioned in our last earnings call.
We had a virtual meeting with a PMTA.
Our version of the FDA back in April we have extreme clarity on our path forward, there and expect to commence our face our first phase III trial in Japan in the fourth quarter of this year.
We do expect to have three phase three trials two of which only need to be relatively inexpensive faced are 28 day trials and one will be a 12 months safety trial.
I know many of you were interested if we ever we'll see what partnership deal to run the clinical trials and more importantly to commercialize our products in Japan.
There's only so much that I could say at this point, but based on current levels of interest and a promising market opportunity for our coma franchise in Japan I do believe that we will achieve the goal to partner in Japan, and certainly believe that this is the best path forward for us certainly for our glaucoma franchise there.
Now for some very exciting news that you saw in our July 27 press release, our dexamethasone answered a our 11.5 phase two study topline data indicated six months a sustained efficacy in a disease called retinal vein occlusion for this desks dexamethasone implant we believe this.
Further validates the potential of our sustained release technology based on a flexible print better factoring technology, along with the use of bio degradable polymer.
For now we are focused on using this technology for our own programs.
All of which combined market in the Western Europe is about 10 billion.
But it could evolve further to other diseases of the including four neuro enhancement.
While we do have Dr., David Hollander with us today, which our head of R&D.
We are limited in what details we can provide you regarding the data on a our 11 o'five.
Because it's going to be presented at an upcoming up commodity conference.
We are still making progress with our a our 135 oethree, which remember that the road kinase protein kinase inhibitor for the treatment of what Andy wet AMD DMD and we do expect topline readout for the first in human clinical stop study for that product in the second half of 2021.
Has there been our plan for some time by the end of 2021, we do expect to have adequate clinical data for our dry eye program as well as our retina programs through side have further to proceed with our product candidates with the best chance is a further clinical and ultimately commercial success, we do not expect to conduct any further studies.
For example on 11.5 until.
After we have a chance to review data from all the other programs.
Now for Europe, we do expect our topline rock land Mercury three data remember rock band as Rocco can in Europe.
And that data will come out.
That phase three data will come out sometime in the in this quarter it'll be interesting to see how our product performance compared again fourth which is may remember a combination of timolol along with the prostate gland in Europe it into the highest price product there and certainly the outcome will help guide our thinking as to the commercialization strategy in Europe.
I would tell you that potential commercialization partners are certainly watching for that data as well on the regulatory front, we do hope to hear that rock Landa is approved by the European authorities either later this year or early 2021.
As you know recently the the administration came out with the and number of guidelines are certainly in intense regarding pharmaceutical pricing in the United States. One of those as you know is perhaps using.
The basket pricing concept that is prevalent in Europe as a way of setting prices here in the United States.
Certainly.
At that idea if it moves forward or if we get any legs at all is going to dramatically impact our ability to or decision, making process regarding commercializing our products in Europe are certainly our prescription products in Europe. So it's certainly going to.
It is something that we keep a close eye out on as we not only unveil the data, but think about the commercialization effort and the timing.
My last point regarding Europe is RF loan facility has been operating with the relevant cobot precautions in place we've had no cobot related supply issues from our plant or any of our outside suppliers are ask loan facility recently became operational so as expected. We do have some idle capacity and we expect to transfer more volley.
Comes to our manufacturing plant, including production of initial clinical supplies for our trials in Japan.
I'd like to do now lets turn it over to Tom Mitro to cover the us commercial update on our franchise Tom well. Thank you Vince I'd like to start with some very interesting stats give you a sense of how well we've done despite the unusual circumstances surrounding to covert nicely.
Good Acuvue data, our total prescriptions for our franchise.
Second quarter, 2020 were 1% higher than the first quarter, while the overall us glaucoma volumes were actually down 6% of course that points to market share gains for aerie products.
Merger totaling 20 was a very strong month for us in fact, the highest at our history in terms of scripts AD units fall, we'll of course by slower April and May due to the pandemic, but in June we had a recovering nicely, including 97% of the franchise prescription volumes, we experienced in March and 99% of the franchise prescription.
Units.
During the shutdown of offices, and resulting decline of patient visits new prescriptions suffered more than total prescriptions, new prescriptions for our franchise were down 14% in the second quarter compared to the first quarter, which equaled the decline in the remark the glaucoma market. However, we saw a nice rebound or new prescriptions for our franchise in June as offices began.
To reopen our franchise new prescriptions grew by 20% over may while new prescriptions for the glaucoma market grew at 15%.
The fact of many offices have opened is particularly exciting for us as we have some excellent new managed care with for communicate and pull through programs to the too.
Are these wins, mostly occurred in may the impact of the pandemic on offices and patient flow certainly depressed the impact we believe our enhanced managed care access will ultimately have once practitioners return to a level of normalcy in their work.
Speaking of managed care.
We now have excellent managed care access Rhopressa has 90% coverage in commercial and 89% coverage and Medicare part D plus another 4% and low income subsidy locks.
Rocco 10 has 89% coverage and commercial and 55% in Med D plus a 15% in low income subsidy locks, that's substantial coverage, which goes a long way to minimize the coverage issues expressed by healthcare practitioners in the past.
I believe this will open up many eye care professionals practices to more prescribing of both rhopressa and rock with them.
At this point over 15000 eye care professionals for Britain prescriptions for our products. We have gained in terms of both reach and awareness. There are now 8300 doctors running consistently on a monthly basis about 800, Dr is higher than the beginning of the year our strategy to drive monthly prescribers to weekly prescribers result.
In our weekly prescribers, increasing for about 3500 at the beginning of this year to 4300, an increase of well over 20% despite covance.
Overall, our average prescriber averages seven prescriptions per month, and Dusseau nine and 10 physicians the highest prescribers of glaucoma medications.
Average 28 prescriptions per month.
Our salesforce continues to be productive in a combination of virtual and in person settings, and we're getting samples for the doctor's offices routinely.
Our Eric sales team has not calling for 10000 highest prescribers of glaucoma products on top of that.
We just added in July a contract Salesforce to call in the next 1500 highest prescribers also in May we added a telemarketing team to call in the next 3000 highest prescribers im going to these initiatives is terribly expensive, but we think they are efficient ways to gain access with as many practitioners as possible.
Okay.
So in summary, and before I turn the call over to rich, we're regaining our momentum our current products are clearly capturing the imaginations of many eye care practitioners with our excellent managed care coverage levels are Paul strategy to move to we'd be prescribers are outreach initiatives and doctors offices seeing more patients I do believe we are poised for future.
Growth.
Rich.
Thanks, Tom as Vince discussed our glaucoma franchise revenues in the second quarter 2020 totaled $18 million.
Normalized gross margin for the three months ended June Thirtyth 2020 was nearly 92%. However on top of that we took a 800000 dollar inventory obsolescence reserve and also absorbed about $5 million and Thats loan plant overhead associated with startup commercial production.
Prior to the approval of the outflow implant for commercial distribution of rock between in the US which took place at the end of January 2020. These expenses would have been charged to pre commercial manufacturing expenses within operating expenses.
Note that pre commercial manufacturing expenses were essentially zero in the second quarter of 2020. So it is more of a geography story of where the costs are classified in our income statement.
And of course as Vince mentioned earlier, there are plans to increase the throughput of the ethylene plant and with that the idle capacity will decline.
Our second quarter 2020, GAAP net loss was $48.2 million or one dollar five cents per share when excluding the $10.2 million or stock based compensation expense or total adjusted net loss was $38 million were 83 cents per share.
For the second quarter or 2020 adjusted cost of goods sold was $6.7 million and adjusted total operating expenses were $43.8 million with adjusted selling general and administrative expenses of $26.3 million adjusted pre approval commercial manufacturing expenses of 0.1 million and adjusted.
<unk> expenses of $17.4 million.
For the second quarter, our net cash used in operating activities was relatively low $22.9 million and we had $241.9 million in cash cash equivalents and investments as of the end of the June quarter.
The net cash used in operating activities of $22.9 million was the lowest we have experienced in many quarters, reflecting accounts receivable collections and reduced spending for travel and meetings for comparison purposes. The 22.9 million in net cash used in operations I just referenced for the second quarter.
This year compares very favorably to the 41.8 million in the first quarter of 2020 $36.5 million for the second quarter of 2019.
Emphasize a point, we used about $23 million in cash in the second quarter and we ended this quarter with $242 million of cash.
As you can see by doing some simple math, we have a substantial cash runway.
Finally shares outstanding at quarter end totaled 46.5 million.
For additional information regarding our second quarter results in prior period comparisons.
Refer to todays earnings release, and our form 10-Q, which will be filed tomorrow.
And now I would like to turn the call over to the operator for questions Sydney.
Thank you as a reminder to ask a question you want me to press Star one on your telephone.
Withdraw your question please press the pound.
Once again that is star than wanted to ask a question.
First question comes from the line of Annabel Samimy with Stifel. Your line is open.
Hi, guys. Thanks for taking my question Q.
I just wanted to talk about that net pricing per minute earlier in the year I guess.
We understood that there won't be additional med D plan that you know the fact that you've got one.
Great and it should I guess, the gas said sufficiently attractive.
Except the terms.
I guess a question I have this wasn't strictly a factor price.
Or would you have needed some.
Comfort in some level on volumes that abroad to offset this contraction in net price.
And clearly with little bit Mark tractor than we would expect second quarter and what are the strategy to improve that other than taking price are there any distribution agreements you can talk to their sampling that you're going to pull back on.
And is it the right runway to look at going forward. Thank you.
Annabel is great to hear your voice on the.
The primary driver for this whole thing was the fact that.
The work that Tom and his team have done out on an out in the field getting our prior authorizations written for patients who.
We are covered by this plan.
Is what drove the plan to want to come talk to us and it's certainly changed their perspective on on what a structure needed to be in order for them to produce onto their formulary and so we waited out and we got to the point, where we found that there was a great balance between the physician in the formulary.
Area in the rebates that we had to provide.
As we mentioned before it's a plan to represent somewhere in the neighborhood about 15% to 20% of the Medicare part D market too big deal.
There are I mean, obviously impacts throughout the country, but there are certainly big chunks of geography, where this plan is clearly the king.
And so what we have seen and I think this is related to co bid and I mentioned that we just haven't seen as many patients coming back or as quickly as we expected them to come back. So we didnt see the big run up that we normally would see whenever we sign up new plan.
Thank you all the way back to the days or Rhopressa as soon as we signed a plan that was say.
10, 15% of Medicare part D market, we'd see a pretty good size of inflection point in pull through about a month or so later here, we didnt see it in the first month, although as.
As I've had a chance to visit with Tom in the commercial team we are seeing it now but.
Our looking to expand the the pull through in that plan. So.
It was a balancing act for US he was a huge plan.
And we felt pretty comfortable and felt that.
Given the.
The feet that we have on the ground and the prospects for their plan and really the physician support that we have for our products because they're the ones are wrote the prior authorization. So now that we go back to them and say Hey, Great News. The plan work you don't have to write those da's anymore. It's a big deals so at the balance at all that and send it has to do it on a going forward bases. It so.
Same dynamics that we'll look at before we sign up any new plants and Thats why we think that again as a whole concept could be that.
We see some stabilization in that in the pricing.
And we do have opportunities obviously to raise prices, we do have opportunities to.
And we're seeing some changes that we're making on a commercial side of.
Coming off of preferred status to non preferred and not paying as many rebates and start impacting revenues is as we are negatively as we thought.
So we'll keep taking those kinds of.
Risks out there as we see opportunities so we.
We hope that that strategy works.
And if I can.
Have a follow up question on a separate topic.
On the I think I'm, sorry, I forgot the number that drive program already.
But it is and many many dry eye disqualified pool.
Okay, Alright filings so many.
Development program, especially in phase three has to conduct separate trials for signs and symptoms.
Yes.
In some cases, they could see signs.
Just couple went down sign when others that book horse.
On since then so what gives you comfort that you can hit both.
We expect to see the same problem with your type of mechanism.
So you have to kind of take it back to define the kind of mechanism that we have so again the mechanism being nicole hitting the cold receptor in the I'm being an agonists we activate that.
On the high this is going to feel like a cooling sensation in the eyes. So that's where we're so excited about improving the symptoms and remember.
Hi, I suffers primary complaint is always symptoms.
For them they decide it's more like a physiological sign that Dr. chambers requires that we do but.
Im going to have David just walk you through a little bit why we think that it makes sense given the data that we have and the mechanism as to why we think triple made agonist.
As a really good chance of doing well in in the clinic and I'll take you back a couple of calls where we talked about we're backing up the truck on this one was secondary endpoints. So just keep that in mine as well because even if we're able to.
Get to sign a symptoms, we'll be able to really.
I get a really close look at everything else to this drug can do so David yes. Thank you. Good afternoon, we're very excited about our trip the made agonist for dry eye a number one as as a cold thermo receptor were actually very optimistic about its ability to hit a symptom in the phase two.
A steady that a visitor ex that conducted on into a very good in terms of hitting a symptom.
Within within that first month, which is always the magic time, if you look at other products out there that has really been the challenge of a lot of the other products hitting symptoms.
We know a lot of the products out there are really just indicated for increases in tier production and then if you go back to the basic mechanism mechanism of action with the trip that made it actually is also designed to stimulate bazell tier production. So within its actual Mexican mechanism of action, we should be able to hit.
Both symptom and sign and then just that small to a study it actually showed some nice increases in tier production within that first month as well as symptoms.
We've we've taken a close look at everything and as Vince mentioned, we do have many many as secondary endpoint on at least sufficiently powered the next study with 360 patients and we're going to look over a three month period, and we're very optimistic that the m. away that that this provides will give us the ability to hit.
Both a symptom and assigned.
Okay, great. Thanks for your help.
Yes ma'am.
Thank you and our next question comes from the line of Ken Cacciatore.
Hi, guys. Congrats on all the progress and the good work here just wondering as you think about your highest prescribers you were saying that's about 28 prescriptions per month, and I would assume that theyre, having the same experience with their patients in terms of efficacy and Tolerability. So can you just talk about.
Why sometimes we have these higher prescribers is it the region that theyre operating in I.E.. They have better managed care coverage is that they're they're just treating more there the board.
Specialized clinicians how do we drive the utilization at the lower tier up to what they're experiencing and then rich as we think about the PNM and the current spending can you just talk about maybe when leveraged starts to appear as we as we look forward into next year this spending level.
About right as it can a tick up a bit but once it picks up bullet kind of normalize as we go into 2021 is we.
Think about the piano and then lastly, just wondering as the the obviously be completion of Allergan Abbvie. If theres any assets that are floating around that might be of interest to you or.
As you think about business development in general obviously, the pipeline is starting to round out, but wondering if you can grab any on market or near market products. Thank you.
Yes.
We're going to try to get to all three of your question. So I'm ready to start off with Tom regarding the the high prescribers turn it over to rich regarding the.
The expense outlook et cetera, and then I'm also going to have rich talked a little bit about the.
The assets that are available and.
Within ophthalmology, because remember he's got.
Both our head of strategy and our head of business development working for him. So he's got a pretty good picture of what's out there. So Tom sure Ken So we're going to answer your question about the about the high prescribers in the numbers and all those things and how do we get the lower prescribers up to those numbers well first off the reason high prescribers get there just to have more people coming in the door that are glaucoma patients.
So when they want to trial of product is very common for them to trial go a number of patients.
In a given week and therefore, when they get the positive reinforcement back from the patients like they have for our products. The velocity just picks up just he thought itself lower volume offices, just don't have that frequency to see its we'll just take several while longer to get through the number of positive experiences they have to wait to see before they really have docket probably.
Oh by the way one of the reasons.
For the ways, we get those lower prescribing or lower frequency prescribers to adopt a quicker and so writer for more and more of their practice is by using reference selling because a lot of our physicians will say if you have anybody that wants to talk to worry about these products and the success I've had with them. Please connect them with me and we'll do that and speaker meetings will do that as this 101 phone call.
All those sorts of things so that's really a theres no. Other science, we had it other than just have higher numbers. They therefore, they get very positive reinforcement much much quicker from a higher volume of patients and that they just quickly adopt that so a winning product in their hands takes off let go look I think are as good with getting to the 20 to 29 prescriptions per month, and we'll get the rest of 'em up there as well too.
And regarding your last two questions Kim from an expense or gross burn perspective.
If you think about the various components.
As cdna is largely intact so of course of primarily.
Along with the support functions the commercial group, which will remain pretty much as they are now so that should continue fairly consistently into next year.
Regarding research and development expenses. There are there are puts and takes it won't be terribly different next year either of course, you'll you'll have.
The completion of Mercury three for example, this year.
And we won't be spending anymore money on 11 O'five.
We spent this year next year as Vince mentioned, so next year from an R&D perspective, it's going to be mostly about spending on the dry program.
But when you add it all up with all the puts and takes the R&D is going to be fairly consistent.
Year to year.
With regard to.
Asset availability I'm, certainly not going to talk about specific assets that may be we may be interested in but I can tell you that we have.
For lack of a more professional turn crackerjack BD group that no every single ophthalmology product out there.
The rules of engagement for us have been.
Innovative products.
And large markets.
And I think you can see that by looking at what we've currently got in our pipeline. So thats, how we continue to evaluate products and as the large companies decide to divest. We certainly are aware of what those assets may be and always ready to engage.
Thanks, so much.
Thank you.
Our next question comes from.
Welcome.
From Citi. Your line is open.
Hi, This is highly on creates all thanks very much for taking my question.
First just thinking about how you've been able.
Elaboration of data coming out of almost trial, we wanted to get your thoughts on any potential clients.
Additional states for pilots you would consider running.
Further support fall value proposition.
Yeah.
Hey, Carly.
The most trial certainly was.
Welcome to addition to what we're doing out in the field and certainly from a doctor perspective, they view that data that to be consistent with what they finally seeing their practices once they start using.
Rhopressa and then eventually start using rocket hand, there are many other users that have been reported for Rhopressa and.
And Rafa Tan and or specifically rhopressa, because it's a new chemical entity and so certainly we do see doctors out there that are had been using the product.
To treat conditions of the Kornya, specifically conditions like Fuchs dystrophy.
Theres been plenty of data reported.
From a Japanese physician.
Dr Kinoshita reporting it for.
That refineries inhibitors do have a role to play there and so while we don't promoted as you can imagine we do season Kornya physicians that have expressed an interest there. So that is an area that of interest and certainly an area of further study for us going forward.
Okay, Great. That's helpful. And then we just had follow up.
So we think thats all of our channel checks that.
You know ophthalmologists are seeing across Europe, Canada superior medication, and we'll be looking generics option, but well also hearing.
Kevin as you're seeking some challenges because you've been in cases.
Were approximately raffle tenor indicated that hammered by a plan there still facing some pushback from payers requiring multiple step edits and prior auth will negatively impact which is ultimately final Barbie typical stride. These medications.
So we can I just wanted to get a sense of how Gary would be able to yes, glaucoma practicable and try and.
Streamlined reinforce that crop.
Hi.
So I'm going to have Tom give you some more details, but one of the interesting things is and we've noticed that there's been a couple of physicians that have gone on and perhaps spoken at one conference or another and talked about issues in reimbursement and obviously, we have access to all that data sort of behind the scenes have been able to track it and what we're finding is that.
Some of these doctors.
Have not totally taken advantage of the fact that the products are covered and so what we're finding as if there is a gap between when we get.
Product covered and we talk about an increase in our.
Managed care market share and when the doctors realize that Oh, yes, I can start writing it and because they just haven't gotten into the habit of that and so I'll have Tom talked a little bit about some of the things that we're doing to try to get that message more broadly.
Broadcasted Firstly, we do a couple of things one is we certainly talk to them about data when things become available and when they can do it because we do here a lot of physicians now.
We hear less and less now thank God, but we're physician say things I call I've tried to write it before as you just don't have very much coverage, whether we show and what our coverage is now we ask what did you really try to get with any sort of frequency before in commonly it was months and months before right. So we've got to just bringing them up to date, which we completely understand that's number one the other two is.
If you take a look at many plants like I'll, just make up of fictitious plan called Bluecross Blueshield right of something I don't care or whatever you want to be we may be covered on Blue Cross Blue shield, what that means as we may be covered for 96% of their patients, but they may have a generic plan. The 80 patient shows our LOE costs.
Our plan a generic plan the patient Cios and we may not be covered on that small sliver of the plant. So when we put that out to the Doctor will work with the office staff and say why don't you do a little more fact, finding was that individual patient. The office staff takes over obviously, we can't do that but the office staff takes over cost efficient back and common may comes back to the doctor, saying.
There are right there part of Blue Cross Blue Cross Blue Shield generic plan, and then that usually clears up clears up any confusion, but as they write it more they find out that the biggest we do have very good coverage for these things and it removes the barriers that that that.
You were in essence addressing with that.
Okay, great. Thank you appreciate the color thanks for taking the questions.
Yes ma'am.
Thank you. Our next question comes from Louise Chen with Cantor Fitzgerald. Your line is open.
Hi, This is Jeff it came on Phillies. Thanks for taking my question has been congrats again on the quarter I've two questions. The first one is.
Our use what are you seeing so regarding the impact from I guess second waves or increases in coal the cases in certain states and do you have any color on what the level of crossovers for those regions and maybe your highest prescribers and you have any plans to manage those impacts. My second question is I think you saw that I've talked about this before.
Since the second quarter gross margins were impacted by idle capacity cost Im just wondering how should we think about margins and where they can go in the second half you expect it to return to that low Seventys range, we sign first quarter, how should we think about that thanks.
Okay. So I'm going to have rich talked a little bit more about the margins, but I'll. Let me just take a stab at the co with thing so.
Our business not surprisingly is relatively concentrated right around 10, or 12 states and we get about 50% to 60% of our business there.
We do track and I personally actually take a look at Coca cases case reports every day and just to see sort of whats moving forward and things like that and then.
Well to cross to have that with Tom in the commercial team to take a look and see how we're doing in the state the great news for us and almost have to knock on wood because it's this week, we actually had.
Every sales rep out in the field.
And so it is beginning to take hold clearly there are some states where they opened in in a shot but the big thing that you notice is not there not opening and shutting elective surgeries.
A lot of those now we're still open and that's what's driving it probably 80 plus percent of the revenues at a doctor's office or ophthalmologists office has today or is coming from elective surgeries and so that's the major driver. So we're not seeing while there are clearly some places that are more restrictive than others. They like to surgery does not have happened to be antibodies.
Cross hairs right now and so we just haven't seen that approach or that hurt us at this point, we do continue to see more and more patients coming through the system.
And patient visits increasing and the number of doctors offices that are operating at normal continue to increase from the base of 45% that we currently have.
And so but.
We do see.
For example, I think is through 4% of the doctor's offices that have yet to open and so it makes you wonder for some of them. It's just like businesses around the country. Some of them may never opened again, and so but we do see that impact. So net net is we havent seen much of an impact from the opening and closing because.
The elective surgeries haven't been impacted yet so I'll have rich talked a little bit more about that gross margin expectations.
Hi, Thanks, Vince so essentially for the rest of this year.
Safe to assume that we'll have that $5 million or so of idle capacity for each of the next couple of quarters.
But as Vince mentioned in his prepared remarks, we do have plans to increase throughput through the plant. So as we look further down the road into.
2021, I would expect that to go down.
The interesting thing about the the idle capacity in the plant this.
For example, if we're manufacturing clinical supply.
For a trial could actually moves to cost at a cost of sales and puts it into research and development. So I want to prepare you to start thinking about that but you will see that type of activity in the future.
Hi, Thanks, so much.
Thank you and our next question comes from Jason Gerberry with Bank of America. Your line is open.
Hi, This is ashleigh on for Jason Thanks for taking my question Congrats on the on the progress. So far. So my question was just really on pricing.
How should we think about the pricey light this quarter and given that this new access came online on May one.
I would imagine that.
Let's see a nice price was slightly lower in May and June versus what it was in the month of April So how should we think about.
No the go forward price.
I will point the franchise.
Third quarter onwards, so can you give people that would help thanks.
Sure so whenever we do sign a.
Contract like we did and it happens to head like May Onest, you have to remember that the reason we sign that as I mentioned earlier myself and my answer to Annabel. His question is sad because we had a lot of prior authorizations are being written through that that plant and so there's two factors that are occurring those prescriptions.
That we were already getting through prior authorizations almost automatically flip over an hour rebate oval and so they immediately impact our plan to while you're right. It didnt start till may the impacts of media and so it's not like it phases in and so then after that is simply the incremental price.
Decryption is that were able to drive through that plan that will dictate but the price has already taken the hit so we don't really expect much of a further hit as it relates to that plan in particular in so we'll always have some puts and takes and we see a little bit more shifting.
Across the payer mix as unemployment rates continue to move one way or another and things like that and so.
But when you add it all up we think that we should see relatively stable pricing and hopefully we don't see any major surprises and less.
Come out and say Hey, look we just signed a major new deal it impacts in another 10% of our Medicare part D business and therefore, you should expect further price attrition. So just know that.
Again, we keep an eye out on that but.
Unless we shot Amy major new deals, we think that we should see it's always going to go up or down a little bit, but we should see some relatively stable pricing now.
Great. Thank you.
Yes, Sir.
Thank you and our next question comes from Greg Fraser with.
Securities Your line is open.
Good afternoon folks thanks for taking the questions.
First question is have you implemented are considered any changes to your co pay program or thought about new programs ticket help.
Support and drive New branch here for your commercial patients.
So we put in I'll have Tom give you some of the detailed but we did put in a co pay card.
At the very beginning of the Rhopressa launch. It obviously have continued it would drop at hand, we now have the same card it covers both.
And so it all.
I'll, let Tom talk a little bit more about some of the things we're doing other commercial side I will give them a little bit of cover here in a sense that remember the percent that we have on commercial pay has dropped off a little bit because of the unemployment rate going up and so it is in a state of flux at this point, but Tom Yes, sure we have a very active cope.
Hey card program and we target those the physicians had actually use them. The frankly the good news for US is that we're actually finding less usage of that as time goes on because our coverage has increased so much and the co pay card will give them a little bit of a quote rebate or so to speak.
For the commercial patients.
For their copay, but again because our coverage is so good we're finding less and less use which we like because that helps in our gross to net calculation, but overall, we're very active with a co pay card plan parts of our products and it's very quite easy to do.
Got it thats helpful on on the contract Salesforce can you provide more details about about that initiative in terms of.
The number of graphs that docs are calling on the desktop et cetera is there any additional color you can provide on that.
Sure I'll be happy to carry out for our contract Salesforce has got a call it roughly 1500.
Practitioners around the country there the after our rough rough call at the top 10000. The next 1500 or is that is the contracts salesforce, which makes face to face calls in each of their offices.
Im not going it really say for competitive reasons, how many representatives that is but they are fully staffed and they'll cover those 1500 as we've got going so I guess, they just started about two weeks ago, making calls out in the field. So what they're doing is they're carrying the same message is that our representatives are that as the every representatives are into these.
Other offices and they're seeing him at a at a plan to see them at a very high frequency. So we think it's you have today because they've been trained just like a representatives you shouldn't see any difference between on every rep. and.
The contract Salesforce represented once they get some experience is about to get going so but again the call. The top 1500 guys right. After this transaction that we color.
Sure Okay.
Then my last question on the dry program, assuming enrollment in that study progressive dance planned when do you think the study could read out.
Yes.
Good question I think Vince mentioned it earlier in the prepared remarks, we're expecting topline in Q3 of next year.
Okay. Thank you.
Sure.
Thank you and our next question comes from Serge Belanger with Needham <unk> Co. Your line is open.
Hi, good afternoon on this inserts.
I apologies if you've already covered this.
I was on another call but.
Just looking at the prescription involve bottle volume trends.
Since the hit there.
Yes, and the theory in.
March and April.
The bulk of the growth has been driven by real clicked in while we'll trust so as remain mostly flat.
So.
Any color on those specific trends and what are your expectations for them to continue.
The second half.
Well certainly at the beginning the year search the we're making great progress using the most data and new started seeing the blip starting occur occurring much earlier than we expected on rebuilding rhopressa on any given week, we do see rhopressa bouncing back up over Rocco Tan and so there it's almost like in a state of flux if you will.
Clearly as the reps have started getting back out there. They are now getting on a more consistent basis and I said. This week, we actually have all all of our sales reps out it out in the field for the first time.
They're getting back on message relative to the most data and rhopressa for so while we have seen some of the rocket Tan pickup.
We do think that there was going to be some balancing act there as a messaging starts moving forward.
And remembering it's it's all based on the pulsing strategy, so dependent on where the Doctor is from a prescribing point of view. So some of the guys may have simply been using rockets hand already steadily so now the sudden.
They just saw more and more user moving more of their patients off of other things on the rocket pad, but the big thing for US is moving those monthly writers that are doing it every once in awhile over to weekly and in order to do that we think Rhopressa, we'll have to win today at least for a while until they get.
More and more experience and so we think it's something that will sort of.
Great and itself back out as the reps are out in the field.
Okay.
Ontario coverage, obviously, you've made some some pretty significant strides in a in the second quarter.
Would you say you're currently at steady state since the commercial coverage and when should we expect to see additional movements on the Medicare part D.
So we do think were relatively steady state at this point, though we do still continue to talk to a number of different remaining plants, especially on the rocket hand side Professor we're pretty well covered so it's really more of the rocket hand coverage that we need fed again, it's going to be a balancing act and just like we did on the on the last Big plan that we sign we do have a lot of prior.
Authorizations during the downturn here, we havent seen as many of those mainly because the doctors.
Just arent seeing the number of new patients and so it's been somewhat slower go there, but we think it will start picking up is more patients come back and so.
We're just not simply we're just not in a hurry to give away big rebates.
Yes, it's where it makes sense for us so.
As things progress and if we find a particular plan where it hits the threshold and it's it's great balance between.
The amount of business that they cover is and where we want to be then we'll tell you about it but for right now we think we're at steady state.
Okay. Thank you.
Yes.
Thank you next question comes from Iran lives not H.C. Wainwright Your line is open.
Thanks can you hear me.
Yes.
Great I have a couple of them just to touch on overall pricing.
I understand the dynamics why this has come down further and ahead some of the puts and takes but just big picture are these gross to nets sort of all in that we're seeing now which by my math look like 70 plus percent off whack.
Are they where are they in relation to way or original expectations might have been when you launch before he launched these products and while you were launching and you thought you know, let's see how this goes before we give it away did you ever think it'd be given away, 70% as that competitive and the market. That's a separate question.
Yeah on an all in basically Sterling and 70% does it make sense and so and certainly there are companies out there that are having to give a lot more than that way of depending on the differentiation in there in their market you have to remember that the we're talking about here in the difference gross to net also includes things like.
The the fees that we came to wholesalers feature double digits and that is very very different if you're a large company. It's a middle single digits in if you're a small companies like ours, you jump into the low double digits and so that's also embedded into that prompt pay discounts and stuff like that are all in there. So.
If we were paying 70% for actual.
Medicare part D rebates that'd be a very different story than we expected to to be doing.
But with all everything in its not out of the question and it is competitive.
So I guess the implication there I guess, what makes you a big company in this space.
And what sort of volume in what revenue run rate do you think it to be at where those margins maybe actually improved materially.
Oh, it all depends on sort of the the exclusivity that you may have it also includes on the threat to the product line et cetera, I'm not sure that there's any one single.
Factor like just simply revenues that'll do it but certainly if you think about the large pharma companies that are multi billion in revenues. They certainly have more juice and are able to play.
At different game with those wholesale.
Fees than we are.
Okay, and if I could switch gears to Europe, Keith I think people of assets in the past I can't remember your answer is what do you feel you need to see in Mercury three.
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On paper I guess to get yourself, a competitive pricing dynamic that makes it even worth launching in Europe do you need to be superior or noninferiority. Good to go and I think in your prepared remarks, you mentioned that potential commercial partners are watching those mercury three results closely and I'm sure. They are but I think.
I also remember you multiple times, saying you know weve due diligence this market and lead determine its best they go on our own so has something changed with regards to partnering or not in Europe.
So the only thing that has changed for US is first of all let me just go through the sequence every question regarding the Mercury three results. We can live certainly from a pricing point of view if were non inferior who can afford it is the highest price combination product out there. So that if that is in pretty good position.
We do believe that we will be superior so that would give us a better price and with a cap. So certainly that and it's a real good incentive for us and so it sets.
In a pretty good positioning should we.
You to commercialize ourselves or with a partner as we have progressed that we are thinking relative Europe. We certainly have had lot of inbound interest from other companies in so it's always a case of having two way of spending that money to go launch in Europe ourselves versus having somebody else do it and it's purely a function of how much money do I would just.
For me to do it in Europe relative to what we what David coming through on on the pipeline and I am I better offline. It spending there. So it's a balancing act and so certainly as we think about some of the prospects not only for the dry eye product. That's been threatened a product of course, we have to think about well.
Maybe on a call a franchise in euro maybe we want to go hand partner like we're doing in Japan.
Again, we havent made that call yet and it will be we do have to wait for the outcome of Mercury three far more importantly today is the new news at all of US got here not too long ago relative to the administration's attempt to control pricing in the United States.
And so there if we are subject to Avenue just pricing in the U.S. her basket pricing in Europe of our own.
Product, we have to think hard about that.
Do you really how much we really think we or a partner are going to generate in Europe and is that going to be sufficient interest to us. We will indicate you hit on U.S. and so that is the biggest single driver at this point once we get Patsy are we inferior or non inferior or superior to again.
Port.
Well I'm sure you won't be alone and that a debate.
All that.
You're absolutely right companies have an awful lot delusions they'd make that.
If they make the wrong decision there.
All right well thanks, thanks answers.
Yes, Sir.
Thank you and our next question comes from lineup.
Your line is though.
Hi, This is Dan Clark on for defect. Thanks for taking my questions. Just just two from us so in the retinal vein occlusion indication are 11 now five years.
Do you expect to primarily compete against the other implant in the market or do you think you can gain share from the index injection based treatments.
And then any color on scrap duration that you've seen since one to 20 would be helpful. Thanks.
I'm sorry at your second question again.
Is there early any change in script duration from one to 20.
Oh, yes, okay.
You mean in terms of.
The.
More 90 day supplies et cetera.
Yes, yes exactly.
Yes, yes, we certainly have so if you think let me to answer that one first and then I'll get back to your Orbio question. So in a sense of the one of the things, we do track or the 90 day scripts and.
We were talking in Q1, we were looking at something in the neighborhood of 1.36 your 1.37.
Bottles per script, and so right now were 1.42, and so we have seen more and more of an increase in a number of prescriptions, which sort of makes sense because it.
It's we've got to spike because folks wanting to get more 90 day supply. They didn't want to go to the pharmacy to didn't know how long the shutdown was going to be in their respective areas and stuff like add so it's not surprising that we see a little bit or movement, there and it really is just accelerate the trend that we were on because we're headed in that direction anyway. We just saw a spike there. So we have.
I've seen that now on on the RV show.
There are.
Out in the market today, So you got to really divided between Europe, and the United States and so in Europe.
We see far more use of steroid inserts than we do in the United States in United States for treatment of ARVO, we see more use of that Jeff inhibitors et cetera, and so.
But what's interesting is in the any you asked where the product that are available are either products like.
One of them only last a couple of months, maybe maybe three Max and then the other one last several years.
And so there is.
Thats it and so what we have seen from day. One is the majority of the products. Our majority the physicians, we'd rather see and injection for six months the advantage of having the print technology as we were able to formulate the insert to deliver exactly that because we know dexamethasone works.
So the question was can we deliver it exactly for the six months because both in the U.S. as well as Europe Thats, what the physicians want it because it's that's certainly helps them from managing the patient flows through their practices et cetera, and also helps and manage the cost to the patient of that so the fact that.
We were able to do that is certainly very very helpful. So we do think that a product. The last six months should do have a better chance of penetrating the U.S. market where to date that penetration has not been particularly extensive not only because of the product characteristics that are currently available, but also because can use threatened with doctors tend to use more by Jeff and how.
Amateurs.
In Europe, we think that is it's clearly.
At least right now a much bigger market because its establish and physicians in retina physicians in Europe do tend to use their or its more often so the fact that we have one that delivers the the outcomes that you're looking for but last actually six months is a big deal.
So we're going head to head into the market.
Great. Thank you.
No.
Thank you and I'm not showing any further questions I'd now like to turn the conference back.
For any further.
Great. Thank you sitting in for everybody. Thank you for joining us. This afternoon I know that has been.
Quite a hectic time since the last time, we spoke during our Q1 call.
We do like our commercial positioning us as we mentioned is more patients come back into the fold, we should see an ice increase in new prescriptions and get our business back to where we thought we were headed back in February timeframe before all of this happen as you've heard today, our pipeline continues to progress very very well and everything's geared towards having.
Data across the board for all of our major programs in the second half of next year. So that we can make decisions starting in.
In 2000 and.
Slide 21 that will impact how we view the business starting in 2000 to from a pipeline development point of view.
Ex us in Japan, certainly we are looking as to partnering there as.
Perhaps the way to go for our coma franchise and also you will start seeing the start of our phase three trials, we do expect to start the first one before the end of the calendar year in the EU I just went through it that we are expecting mercury three before the end of the year.
But the big thing right now is taking a cautious look about the impact of launching in Europe on anything that we could be doing here in the United States, specifically around some of the pricing discussions going on in Washington last but not lease as rich mentioned so eloquently.
You could see on RPL the impact of.
The expense control on our cash burn and so while we do have R&D that we're going to be spending et cetera, and all the way through into next year.
Revenues grow you could see sort of where we're going to end up and it makes us feel pretty good that.
Again, we're making progress towards that end, even though it was a bit artificial for this last quarter because of the co. Good lowering expenses due to travel et cetera, but again, we we'd like the prospects for the PML.
Building and continued progress there. So overall, we thought it was a good quarter, given especially given the circumstances, but certainly look forward to coming out of this in a much stronger fashion. So again, thank you for being with US This afternoon or this evening and have great Dane be safe.
Ladies and gentlemen, this concludes today's conference call. Thank you Goodbye.
Everyone now goodbye.
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