Q4 2020 Flexion Therapeutics Inc Earnings Call
Good afternoon, ladies and gentlemen, and welcome to the flexion therapeutics fourth quarter and for years 'twenty 'twenty financial results Conference call. At this time, all participants are in a listen only mode.
Facilitating the question and answer session at the end of today's call.
If at any time during the college of acquired assistance. Please press star followed by zero and Accordant NATO will be happy to assist you.
I'll turn the call over to Scott Young sections, Vice President of the corporate Communications and Investor Relations.
Good afternoon, a short while ago, we issued a press release summarizing our Q4 and full year 2020 financial results and recent business highlights that press release and our most recent commercial metrics slide can be found under the investors tab on the company website and a replay of this call will be accessible there shortly at.
After its conclusion.
Today's discussion will be led by flexion as Chief Executive Officer, Dr. Michael Clayman, and he is joined by Melissa Layman flexion as Chief commercial officer, and David Archuleta Flexion as Chief Financial Officer.
On today's conference call, we will be making statements relating to future financial and business performance market conditions strategies, and the other business matters, including expectations regarding revenue cash utilization clinical regulatory and commercial developments and anticipated milestones which are forward.
Looking statements within the meaning of the private Securities Litigation Reform Act.
These forward looking statements are subject to various assumptions risks and uncertainties, which change over time and such statements speak only as of the date of this call.
Additional information on the factors and risks that could affect <unk> business financial conditions and the results of operations are contained inflections filings with the SEC as well as on flexion website.
I will now turn the call over to Mike Clayman.
Thanks, Scott and thank you all for joining the call today I'll recap of our business performance in 2020 review recent progress within our pipeline and discuss our priorities for this year following that Melissa will provide an update on our commercial activities and then David will summarize our 2020 financial.
Formats before we open the line and take questions.
To begin as we reported today, we recorded full year's will read of net sales of $85.6 million for 2020. This represents growth of approximately 17% over 2019.
And considering the unprecedented challenges we experienced last year due to the pandemic. We are very pleased with these results.
As we've discussed on previous calls the pandemic had a tremendous impact on patient flows to doctors' offices and corresponding demand for <unk> in late Q1 and Q2.
However, we saw sales recovered nicely throughout the second half as we've discussed it is our intent to reintroduce the already sales guidance. Once we return to a point, where we can do so with the high degree of confidence and precision.
That said the impacts of the pandemic are still being felt today and we believe it is still premature to reinstate guidance at this point.
Nonetheless, the need for <unk> has never been greater nor has our belief in its potential to make a real difference in the lives of the 5 million people, who receive intra articular injections for OA knee pain each year.
We ended 2020 was slightly more than 2% penetration of the intra articular injection market.
And our view is that this is just scratching the surface of zelle read as potential which includes becoming a frontline treatment for knee OA patients.
Our first priority has been and remains accelerating the utilization and adoption of <unk>.
And this year, we intend to initiate a trial to investigate its potential in shoulder OA.
Although a smaller indication of the knee OA shoulder represents a sizable growth opportunity for <unk> with the potential total addressable market of roughly 600000 injections per year.
And the need for <unk> has never been greater despite the fact that opioids are not recommended for the management of OA knee pain have modest efficacy for that condition and possess potentially devastating risks associated with their long term use a recent paper estimates that more than 850.
The knee OA patients in the U S use opioids chronically to manage their pain.
A truly alarming statistic as we've consistently stressed flexion is committed to the development of non opioid treatments for muscular skeletal conditions like OE that commitment begins was already and also extends to our pipeline as evidenced by FX two of one <unk>.
The FX 301, which I'll turn to you now.
Regarding FX 201 are locally administered gene therapy product candidate, which aims to provide meaningful pain relief and functional improvement for at least six to 12 months. Following a single injection today, we announced that we have treated the first patient in the high dose cohort of our phase one single ascending.
Dose trial.
While this is a small safety and Tolerability study with only 5% to eight patients in each cohort.
We have seen some encouraging, albeit early signs of clinical activity in even the lowest dose cohort and we intend to share data at a scientific meeting in the first half of this year.
In addition, we are expanding the number of patients in the low and mid dose cohorts by up to 20 additional patients each as we believe that additional data can help further inform our understanding of dose response for both safety and efficacy of.
Evaluate biological activity in the knee joint.
And shape the design of a potential phase II proof of concept trial in patients with the OE.
We expect to have data through week 52 for patients treated in the initial low and mid dose cohorts by the end of 2021 in.
In addition, preliminary data from the high dose cohort and expanded treatment groups are also anticipated before year end.
Shifting the FX 301 are locally administered peripheral nerve block candidate for control of postoperative pain, We recently announced that the FDA cleared the IND and we intend to begin a phase <unk> clinical trial in <unk> patients in the first half of 2021.
FX 301 is a non opioid which utilizes a NAV one seven inhibitor funded pied formulated for extended release and of thermo sensitive hydrogel with the aim of providing at least three to five days of post operative pain relief, while preserving motor function.
Unlike <unk> and FX too of one which address chronic pain FX.
The FX 301 is intended to treat acute pain within the endpoint that looks at days versus months as a result, the FX 301 development program has the potential to move relatively quickly and.
And we expect to share top line results from the planned phase one B trial late this year.
Finally, with respect to our management team as many of you know Dr. Scott Kelley has been serving as our Chief Medical officer for the past several years.
We are initiating of search for a new CMO and Scott will continue as CFO until a successor has been appointed.
At that point, Scott will transition to a new role of inflection that leverages. His extensive knowledge clinical experience and business acumen and we look forward to his continued contributions.
Before I turn to Melissa I would simply restate, what I said before this is without question. The most exciting time inflections 14 year history, the opportunity for us already is tremendous and our passion for the product and our commitment to commercial execution.
Is reinforced by the patient stories, we hear so often and very typically begin with zelle read of changed mine life for the first time in the years I can do fill in the physical activity without pain and while early days, we have made important strides advancing too compelling.
<unk> product candidates each of which holds the potential to be transformative in its space.
Look forward to providing updates in the quarters to come.
Melissa.
Thank you Mike the <unk>.
For execution that Mike described with certainly a key driver of our performance throughout 2020, as our nvme found ways to get sort of ready to practices and patients even at the height of the COVID-19 related impact to physicians and patient care.
With the support of our revised marketing strategies and tactics are field team delivered 17% growth over 2019, even though access to physicians and patients with compromised for a significant proportion of the year.
In spite of the pandemic, we continue to make strong progress throughout the fourth quarter as evidenced by the rate of sales from $26.3 million.
We shared our usual commercial metrics when we pre announced sales back in January so I won't go through the slides the detailed today.
However, there are a few key points that deserves highlighting.
We target roughly 5400 accounts and by the end of 2020, approximately 4200 50 accounts had purchased Loretta reflecting growth of 176, new purchasing accounts versus the end of Q3.
Of those purchasing accounts, 78% of them placed at least one reorder by yearend, indicating that the overwhelming majority of accounts have had more than just the initial experience with the product.
We've talked about the utilization continuum in the past and described helicopter typically start with smaller orders and often as they gain confidence in the product's performance and comfort with reimbursement by with greater frequency and volume.
This pattern is illustrated by the fact that approximately 1200 40 accounts had meet your read of purchases of more than 50 units since launch contributing almost 308000 units and indicating the initial experience to get to us and ultimately adoption.
This is further illustrated by the fact that approximately 10% of customers have purchased greater than 200 units since launch and the 30% of those had purchased 500 kits or more since launch.
With all of that said, none of our accounts of yet fully adapted to a writer and there is still tremendous opportunity for growth across all of our targeted accounts.
We know that our investors have appreciated these metrics over the past few years, but at more than three years in market. We feel the time is right to refresh our commercial performance indicators.
We intend to introduce new metrics, beginning with Q1 and look forward to sharing those of milk.
Before I turn it over to David I would like to briefly outline our commercial priorities for this year.
At a high level our efforts are focused on three main areas.
<unk> positioning and market segmentation.
Pricing and physician reimbursements and amplification of the patient voice.
We are developing various programs across all three of the strategic pillars, which are designed to increase growth.
Well I won't get into the details of those plans today I will say that they have all been shaped by the research initiatives that I've referenced over the last several quarters.
I'm excited to report that the insights from these various studies consistently indicate that there are real opportunities to enhance our approach to the market and increased threat of adoption.
Kim on these findings is the need for hcp's become more consistently exposed to the quality of the patient experience with the Loretta how it can change of patients' lives and how by gaining that exposure physicians can and should become compelled to consider it across their broader patient population.
To this end and among other patient experience based initiatives.
<unk> continues to develop a roster of elite athletes, who have benefited from the already with the recent addition of Sheryl Swoopes. The first player to be signed for the WNBA.
Three time N V. P. Three time of Olympic Gold Medal winner N C. Double a championship winner and named one of the league's top 15 players of all time.
Cheryl along with the other members of isn't where the team, including Rod Woodson NFL Hall of the neighbor and 1980 USA hockey team Captain Gold Medal winner, Michael raising equity will continue to work with flexion as ambassadors for us.
Awareness of what the weather has done for them and what it can potentially do for the thousands of amateurs, who suffer with Boise thing every day.
Mike said it in his opening we have heard so many patient stories of the profound the positive experience with the letter and we are working to ensure that our customers hear about these experiences with every chance we get.
And at this point I'll turn it over to David.
Thanks Melissa.
I'll briefly walk through the fourth quarter and full year 2020 financial results included in the press release, we issued this afternoon and in our 10-K.
We reported a net loss of $113 7 million for full year 2020, as compared to a net loss of $149 8 million for full year 2019.
Net sales of the Red Oak for $26 3 million for fourth quarter, 2020, and totaled $85 6 million for full year 2020, an increase of 17% compared to full year 2019.
Cost of sales for full year 2020 was $19 2 million.
As we reported in our pre announcement of 2000, twenty's or out of sales of the inventory held by specialty distributors at year end was slightly above the one to three weeks, we typically target due to specialty distributor purchases in response to growing customer demand in Q4, and a modest distributor buying at a small discount also in Q4 for Q.
For our net sales reflect the gross to net reduction of 15%.
The gross to net reduction includes the rebates the health care providers that are variable and based on the volume of product purchased in these provider rebates contributed 6% of the total Q4 gross to net reduction.
The remaining growth to net reduction of 9% is comprised of distributor and service fees returns reserve and mandatory government discounts and rebates, including Medicaid 340, B institutions and Veterans Administration and department of Defense for full year 2020, our gross to net reduction was 14% of which health care provider.
Rebates represented 5%.
Research and development expenses for $54 3 million and $69 6 million for the years ended December 31, 2020, and 2019, respectively. The.
The decrease in R&D expenses of $15 2 million was primarily due to expense reductions taken in response to COVID-19 in particular, a decrease of $13 2 million in development expenses for ease of rata due to a reduction of lifecycle management activities, a decrease of $1 5 million related to our portfolio expansion and the other.
Program costs, and a decrease of $2 million in salary and other employee related costs.
These decreases were partially offset by an increase of $1 5 million in expenses related to FX two of one clinical trial and related manufacturing activities.
Selling general and administrative expenses were $105 million and $129 7 million for the years ended December 31, 2020 in 2019, respectively selling.
Selling expenses were $72 3 million of $96 3 million for the years ended December 31, 2020, and 2019, respectively. The.
Year over year decrease in selling expenses of $24 million was primarily due to expense reduction measures taken in response to COVID-19 in particular, the elimination of wide presence at industry conferences reduction in in person physician speaker programs and reductions in select marketing programs in Ms.
Cereals, as well as a reduction in travel expenses due to physician office limitations and travel guidelines and restrictions at the state and local level.
General and administrative expenses were $32 7 million and $33 4 million for the years ended December 31, 2020, and 2019, respectively, which represents a decrease of <unk> 7 million year over year. We ended 2020 with total full year operating expenses inclusive of cost of sales of one.
$178 6 million, which was consistent with our prior guidance of $172 million to $182 million.
Interest expense was $20 million and $17 1 million for the years ended December 31, 2020 in 2019, respectively.
As of December 31, 2020, the company had approximately $175 3 million of cash cash equivalents and marketable securities compared with $136 7 million as of December 31, 2019.
Based on our current operating plan, we believe that our current cash balance is sufficient to fund our operations into at least mid 2022.
At this point I would ask the operator to open up the line for Q&A. Thank you.
Thank you very much that concludes our prepared remarks, we will now open the call for questions asked the question you will need the press star one on your telephone so let's Joe Your question first the pankey to ensure we are able to get everyone participants of Astro limit themselves to two questions. If you have additional questions. Please rejoin the queue and we will come.
Back to you as time permits thank you.
The first question comes from Greg Sullivan of <unk> with Goldman Sachs. Your line is now open.
Hi, everyone of them congrats on the quarter.
This is Jack on for Greg maybe a quick question on FX 201.
Have you had any discussions with regulators about what the clinical path looks like after the current failure of an and.
What kind of visibility you might have on your later stage trials and what they might look like thank you.
Yeah, I would just say this without getting into it this is mike without getting into too much detail. We certainly had discussions with regulators in the U S and elsewhere.
Describing a development plan.
At a pretty high level.
And we will continue those discussions and get refined.
Assessment of downstream development needs, but I would just say this that the interactions with regulators have been.
Very pleased Joe and productive to date.
Thank you.
Thank you. Our next question comes from Martin Auster with Credit Suisse. Your line is now open.
Yeah.
Hey, everyone. This is mark.
Mark on for Marty Thanks for taking my question I guess.
FX Pier one.
Are there any biomarkers that at least in your preclinical studies for for protective of.
The claim functional benefit in the animals.
And then in your preclinical studies.
Leaving of certain IL, one RNA expression predictive of benefit or was there anything else.
Yeah, I would say this market, where we are as you might imagine we've collected a tremendous amount of data, we're still sifting through that premature for us to say that there is or there isn't.
We are keenly interested in assessing biomarkers in the clinical realm and we're in the process of doing that so I'll simply say stay tuned.
We to the extent that those.
Are informative and correlate with response, we'll certainly make that a topic of discussion.
Got it and then just in terms of the follow up I was curious and really for that.
It's still early but at this stage how are you thinking about potentially defining of Doug.
Will there be driven by functional data or something else with that trial expansion you expect youll have what you need for you to define the debt.
Thanks, Dave.
The really good question obviously.
Market It begins with safety and Tolerability, so but your your question really would be if all three doses are well tolerated for the sake of discussion how would you choose amongst them and we will use the data from the expanded cohorts to help inform that decision.
Got it thanks for taking my question.
Thanks.
Thank you. Our next question comes from Randall <unk> with RBC capital markets. Your line is now open.
Great Mike in the absence of guidance I was hoping you could give us some color on <unk>.
Pandemic impact even if qualitative so at a conference last week, you talked about patient flow still only around 80% of pre COVID-19 levels that are expected to stay there for six months to me that seems.
Conservative so can you dig instead of a bit more I mean could we see warehouses demand so to speak from folks who are waiting for a vaccine or.
Frankly, the who are probably getting that right now given the age group of your patient cohort.
For the venture back in the Doctor of physician offices for elective or.
The treatments. So that's number one and then number two for David I know, you're not giving revenue guidance, but how should we think about spend patterns for the share. We saw opex spend in 2019 of close to $200 million in 2020 closer to $160 million. So as we look ahead what type of <unk>.
<unk> spend level should we be thinking about given all of the.
Changes that we've seen in the business through the pandemic. Thank you.
Hey, Randall great questions, let's take them in order.
All exert my prerogative, the CEO and delegate the question. The first question to Melissa and then obviously, David the way on the second.
Thanks, Mike and thanks, Randall So your question about.
The potentially conservative nature of the 80% of patient flow.
That is the statistic that we have pulled from the very recent survey of about 30 of Orthopedists from across the country and that's what they're reporting to us of that they are still at about 80% of pre COVID-19 patient flow and that they anticipate that this will remain the new normal potentially well into the future but based.
On what we asked and had answered the majority of them side of it. They thought this would be the case for at least the next six months.
Yeah. This is David Thanks for the question Randall so.
As everyone knows we took meaningful steps and actions in 2020 to reduce our operating expenses given the uncertainty to our business regarding the COVID-19.
We do clearly expect our operating expenses to increase this year, we're very much committed to appropriately resourcing and investing in the ready to drive increased adoption initiate is already of shoulder OA trial and advance the exciting pipeline that Mike and Mike talked about to provide just a little bit more.
<unk>, though.
On a year over year growth rate basis, given what I. Just said, we do expect R&D expenses to grow faster year over year percentage wise than what we expect for SG&A expenses to grow on a year over year basis, and just one more additional point is we do think SG&A is going.
To be increasing in 2020, one at a at a reasonable rate over what we spent in 2020.
Great. Thanks.
Thank you. Our next question comes from Elliot Wilbur with Raymond James Your line is now open.
Thanks. Good afternoon first question for David just going back to your comments on the GTS trends in the quarter.
The.
It sounds like you expect.
The right to actually improve a little bit in the course of 2021.
Just wanted to get confirmation.
Of that.
And then for Mike or Melissa just thinking about the.
Shoulder indication.
<unk>.
Given experienced the date in the knee and all of the additional research you've done.
And the in terms of the primary research with physicians.
The reason or rationale that the uptake curve.
In shoulder might look quite different than what we've seen in any outside of just.
Experience and greater awareness overall.
Oh, yes.
Yes, I'll take the.
The question on gross to net.
So just.
Just a little history.
Q2, Q3, and Q4 of last year, the total growth to net was 15% each one of those quarters.
As we've talked about before.
We are not going to provide projections as it relates to gross to net deductions.
And certainly one of the drivers of growth to net are the rebates and discounts to health care providers.
We're going to continue to.
Evaluate and consider using.
The rebates and discounts as a way to really enhance the value proposition of <unk> for health care providers going forward. So I wouldn't I would not read anything into.
What we've done historically from a gross to net standpoint, we will evaluate things on a go forward basis, we're always going to be thoughtful and judicious about our future.
Future actions.
And then I'm happy I talked the other <unk>.
About the expectation of shoulder uptake. So it's an interesting story I think.
You might expect the adoption trajectory for us already and shoulder to look different than it has for me.
And that's because first of all of the <unk>.
Population of significantly smaller 600000.
The procedures versus.
Eight 8 million injections every year into me however.
Based on anecdotal feedback conversations that we've had with joint specialists to do both knee and shoulder work.
There is a real paucity of options out there available.
For management of the shoulder pain and the shoulder replacement surgery is complex and challenging and there's a need for something to help manage these patients through to or an avoidance of that shoulder surgery.
Add to that that for the number of physicians out there.
Both knee and shoulder work.
Opportunity for.
The physicians, who get experience with the <unk> in the shoulder of where they may not have had significant experience with it in the knee.
It does exist, where there could be some spillover effects from their shoulder experienced back into there.
Thank you. Our next question comes from Gary Nachman with BMO capital markets. Your line is now open.
Hi, good afternoon for.
Melissa where are the sales reps now in terms of face to face interactions with the physicians and the modifications you plan on doing either to the sales force for the target physicians had of stratify them in terms of the different buckets that they are sitting in and how you want to ship that going forward.
And then from Mike.
I'll just throw the second and are you aggressively looking to bring more assets into the pipeline do you have the capital to do that.
You have a decent amount on your plate silverado shoulder to of one 301.
Are you satisfied with that or you want to build that up further thanks.
So I'll take the first part of the rest of the right.
About a 70 30 split today with regard to live in person access versus remote access continuing to leverage the zoom platform and other technologies to engage with physicians as much as possible.
And with regard to.
Reorganization of the sales effort.
I've talked a lot.
Number of times on previous calls about the ongoing research efforts to help us identify what is the optimal size and shape of our sales force.
What I can say now is kind of stay tuned on that.
Based on the segmentation work that I cited in prepared remark and the work that is now ongoing relative to.
Where our effort in the best play.
We'll be coming to you closer to the middle of the year can you talk about any changes that that might portend in terms of how we are aligned against the fields of some 5000 orthopedic targets out there.
Yeah, and Gary as it relates to the pipeline we're not done.
We will continue to judiciously add to the pipeline I think Adam music and our Chief business Officer.
As enabled by our formulation expertise in the innovation lab has done a tremendous job of cost effectively adding outstanding assets to the pipeline and we've said consistently that we need at least three high quality shots on goal credibly argue that there's a good chance of at least one making it the market we have to.
We're looking for more we're going to be thoughtful rigorous and ensure that whatever we do makes good business sense, but.
Simply put we are not done.
Okay, great. Thank you.
Thanks Jerry.
Thank you. Our next question comes from Serge Belanger with Needham <unk> Company. Your line is now open.
Hi, good afternoon.
First question for for Melissa.
I think in the past you've talked about.
DTC advertising being dependent on reaching a certain level of education and awareness.
Where are you relative to.
Debt level that you need to start of DTC campaign, and secondly, it's now been about a year.
Since you launched with the updated sort of Red label.
Do you have any indication is free.
There's been a change in the number of patients receiving repeat dosing where or change in the number of physicians administering.
The road of more.
Other than one in the same patient.
Thanks.
Yes sure.
So.
Let me I'll take those in reverse order.
So with regard to the repeat dose indication it has been about a year since we've had that label change.
With regard to that language that was originally in the label Anecdotally speaking we hear from the physicians all the time that they have very little hesitation to use the word of repeatedly in themselves with patients as well as in their patient population and we definitely see positive trends with regard to hcp's willingness to multiply inject.
Patients, where we have some work to do you still is with the level of of the at the commercial plan, where there are some commercial payers that limit use of <unk>.
Two what is expressly stated within our label which is.
Single injection and we we have ongoing efforts.
To make headway in removing those restrictions where they affect us the most.
And I'm sorry, what was your the.
The first question again.
Both DTC advertising.
Alright. Thank you. Thank you.
So yes so.
I would say that DTC is always on the table I would also say that I don't think we are yet at a point of market penetration, we're investing in a full blown direct to consumer advertising campaign would be.
A smart investment that said, we do continue to advance on a number of different direct to patient initiatives.
That connect interest in patients suffering with OA of the knee share.
Known physicians who have.
Good experience with the Loretta and who are willing to prescribe it for those patients. We also do a fair amount of local search engine work with the router in markets, where we have a large number of activated physicians and accounts as well as a lot of sort of local publication.
In newsletters and magazines, where we know of OA patients tend to seek out information.
Okay.
And then one more for from.
For Mike I think in the past you've talked about the overall market consisting of about $8 million.
The injections on the annual basis.
What do you think that number was.
In 2020.
With the warehouse demand that you've talked about where it could go in the 2021.
Yes.
Yes.
So great question and I would be speculating on exactly what the entire size of the market, we're going to look at that surge.
But we don't I don't have a firm number I mean, the expectation based on everything we know in terms of patient throughput in the practices that it's it was less than 8 million that I can't give you anything more than a.
A qualitative assessment of that and as I say, we track these things very closely and we'll be in a better position to.
Make that assessment or make that determination in the not too distant future.
As it relates to what we expected to be in 2021 that is the realm of firms speculation.
And firms speculation so I, just I'm not going to go there because too many moving parts and too tough to predict but these are both good questions.
Okay. Thanks.
Thank you.
Thank you. Our next question comes from Patrick <unk> with H C. Wainwright. Your line is now open.
Thanks. Good afternoon first question is on FX 301 can you tell us how many patients have been enrolled in the expansion phase of the phase one trial and for the data expected at the end of 2021 and how many patients would you anticipate generating data and what if any efficacy data should we expect from the low and mid dose cohorts and then just your expectations around that.
Data release.
Yes, so just we're not going to Pat Thanks for all good questions and I'll try to keep them all of my head keep beyond this year.
The.
The expansion cohorts has been initiated we expect those to enroll relatively rapidly and we expect to have data.
All of those patients the 20 additional patients and lowering the dose by the end of the year, obviously they will be.
The limited and that they will not have long term follow up.
No.
Fully expected by the end of this year just to be clear, we will have reasonably long term follow up on low and mid dose.
Patients in the single ascending dose portion of.
Of the FX 201 study we will have.
Some.
The data efficacy data on the expansion cohorts for low and mid dose by the end of the year and we should have a.
Reasonable amount of data on the high dose cohort, which as you understand just started enrolling.
We're looking at the classic measures of efficacy.
Nothing we're not inventing new measures of course, we're looking at Biomarkers, but.
The measures of efficacy in osteoarthritis, our I would say reasonably straightforward enterprise, what we've looked at before.
And I suspect I'm missing at least one or two of your questions. So please have at it.
No I think the.
Pretty much covers it.
I guess just a follow up then on <unk> I.
I'm wondering if you can tell us of the status of the OE program.
And shoulder and when we can expect the phase II study to start and then Joe.
On until rather in China, the status of that of that program when the regulatory filing to be submitted in China, and how significant could go run in China opportunity would be.
Yes regarding shoulder pads.
Pat and I just wanted to point out that you're married two completely disparate questions into one. So you have now exceeded your limit but thats okay.
As it relates to shoulder I would simply say stay tuned we're working through the details of fully incorporating FDA feedback into the design of that study there is some back and forth with the agency we wanted to be sure that once we commence that study we are.
Creating a dataset that will best meet regulatory expectations. So I'll simply say stay tuned and we will.
You and everyone else know when we've initiated that study, but when youre showing the guiding to initiating it this year.
As it relates to China. It's there are a lot of moving parts, there and I think it is simply premature to provide any detail.
On regulatory filings there that would ultimately culminated in the approval of the product.
As we.
Gain additional information from our partners in China, and there has been very good flow of information in both directions and we're in a position to provide clarity on status there we will.
Got it that's helpful. Thank you very much thanks Pat.
Thank you. Our next question comes from Karl lines of Northland Capital. Your line is now open.
Thanks, just kind of following up on manufacturing can you provide us with an update on manufacturing and when you might expect cost of goods to revisit.
The more normalized levels and then a follow up question to Melissa which is what is your current observation of.
T Teekay procedure volume relative to pre COVID-19 levels.
Hey, Carl It's David Let me, let me take the first question the man asking the question.
I think as you know we resume manufacturing of the router in the fourth quarter of last year. So so we're back the manufacturing cerrado and going forward. So this year 2021.
We expect Cogs cost of goods sold and gross margin percentage should be more normalized and buy more normalized I mean.
What we were experiencing in the quarters prior to COVID-19.
With all of that said appreciate that there's a certain amount of continue the inherent variability in our cost of sales as sales continue to ramp.
And Karl with regards to your question around the observations of Teekay volume versus pre COVID-19 levels in the research that I referenced earlier that we've conducted very recently to see where trends are in general relative to COVID-19 impact the pace.
The <unk> flows the also queried on return to pre Covid elective procedure level and the feedback that came back there was again around 80% so.
Considering the Teekay is considered by and large electric procedure I would say that that's probably a safe assumption that teekay volumes are around 80% of pre COVID-19 levels.
Understood. Thanks, so much.
Thank you. Our next question comes from Frank was best for US with Oppenheimer. Your line is now open.
Alright, Thanks for taking the question I was wondering if you can touch on maybe we think of a lot about the.
The immediate release steroids versus the extended release steroids, but I was wondering any.
Any update you can give on the HOA market and maybe the dynamics there through Covid, how does that going down.
Okay.
Please go ahead.
Yes, yes.
Thanks.
And Francois relative to changing dynamics in the HLA market relative to Covid.
<unk> been fairly silent on that front, we haven't we haven't heard of a significantly different change in the market dynamics relative to either short acting corticosteroids or <unk> injection.
As it relates to sort of what we've seen from <unk> standpoint, which is the degree to which patient flow is compromise versus pre COVID-19 levels.
Is likely the degree to which.
The volumes of Injectables are similarly compromised.
Okay, great and any updates on maybe reimbursement pressure on the AG side since it doesn't seem to show much clinical efficacy compared to placebo.
Yes.
Well I'd like to I'd like to answer that question.
You bet, we haven't we haven't heard much about.
The change in reimbursement related to the lack of efficacy data that's out there.
There are a couple of <unk> injectables debt.
Do not report theory, and that gives them a lot of latitude with regard to how they play with price and ultimately.
Cost of recovery for the practices.
So.
More to come on that hopefully, but sort of status quo from where we were in.
In prior quarters, when we talked about this dynamic.
Okay. Thank you very much.
Thank you as a reminder to ask the question you will need the press star one on your telephone. Our next question comes from Bruce Jackson with the Benchmark Company. Your line is now open.
Hi, Thank you for taking my question looking at the channel agreement can you tell us some of where they are right now in terms of the development programs.
The <unk> did you say the China development program.
Correct, yes.
The status of that program Bruce's.
They are getting clarity from regulatory authorities on exactly what's the.
<unk> would you be required to get to registration. So so work in progress and when we learn more and we're in a position to share we will.
Okay, and then a quick follow up is there potential for any other international agreements.
Well Bruce whenever.
Speculate on what might or might not happen, but we are complete the open to the possibility of partnering zone.
Ed.
Wherever it makes business sense outside the U S.
Alright, Thank you very much.
Thank you Bruce.
There are no additional questions.
Well. Thanks, I just wanted to say, thanks to everybody who joined us today.
We genuinely look forward to sharing updates with you in the coming weeks and months.
And I appreciate your time and attention be well take care.
Okay.
Ladies and gentlemen, this concludes today's conference call. Thank you for participating you may now disconnect.
Okay.
The revenue.
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