Q2 2021 Horizon Therapeutics PLC Earnings Call
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Okay.
Good morning, and thank you for standing by welcome to the Horizon Therapeutics plc second quarter 2021earnings conference call. As a reminder, today's conference call is being recorded I would now like to introduce MS. Tina Ventura Senior Vice President of Investor Relations.
Thank you Justin good morning, everyone and thank you for joining us on the call with me today are Tim Walbert, Chairman, President and Chief Executive Officer, Paul Hoelscher, Executive Vice President and Chief Financial Officer, Liz Thompson Executive Vice President Research and development and Andy Pasternak Executive Vice President.
<unk> strategy officer.
Tim will provide a review of the business, including our second quarter performance. Liz will then provide a review of our R&D programs, followed by Paul who will discuss our financial performance and guidance in more detail. After closing remarks from Tim we'll take your questions.
As a reminder, during today's call, we'll be making certain forward looking statements, including statements about financial projections development activities, our business strategy and the expected timing and impact of future events.
Our actual results could differ materially due to a number of factors, including the risk factors and other information outlined in our latest forms 10-K 10-Q and in the 8-K filed with the Securities and Exchange Commission and our earnings press release, which we issued this morning.
You are cautioned not to place undue reliance on these forward looking statements and horizon disclaims any obligation to update such statements.
In addition on today's conference call non-GAAP financial measures will be used these non-GAAP financial measures are reconciled with the comparable GAAP financial measures in our earnings press release and other filings from today that are available on our investor website at Www Dot Horizon Therapeutics Dot Com I will now turn the call over to Tim.
Thank you Tina and good morning, everyone.
We delivered fantastic results this quarter with strong performance across the business.
Sets us up for continued momentum from the second half for the year.
It depends from Relaunches outperformed our expectations driven by rapid patient starts strong new patient demand and increasing prescriber base.
With respect to generated year over year growth was 73% driven by continued acceleration in the use of KRYSTEXXA plus immuno modulation, which is now at more than 40%.
With growth driven by both Rheumatologists and Nephrologists.
For victory pursues we each delivered strong double digit growth as well.
In total our net sales increased 80% and adjusted EBITDA increased 92% underscoring our position as 1 of the fastest growing biotech companies.
As a result of our performance were significant increase our guidance for full year 2000 net sales for your total company net sales in full year adjusted EBITDA.
Full year to present net sales guidance is now more than $1.55 billion, representing more than 89% growth year over year.
Our increased full year net sales and adjusted EBITDA guidance ranges represent strong year over year growth at the mid points from 40% from 28% respectively.
I will now discuss key second quarter and recent achievements.
We continue to significantly expand our portfolio and pipeline.
New early stage next generation gout program for collaboration with Arrowhead as well as we initiated 3 new clinical trials.
We continue to support our on market for medicines with many new data presentations and publications.
This includes 2 new publications in June with independent physicians when the successful use of preparing for it and patients with chronic thyroid eye disease for TEP.
There are now 6 publications with a total more than 50 chronic <unk> patients in multiple case reports.
In addition, we presented new data highlighting the efficacy safety and differentiated benefits of replacing them.
We rewarded for new best workplace recognitions with the number of awards for the year now it's 7.
This is continued evidence that our performance and employee focused culture is a key factor in our industry leading growth.
We acquired the new biologic drug product manufacturing facility in Waterford, Ireland.
This is key to supporting the continued growth for.
KRYSTEXXA net placement as well as our debt.
Element stage biologics and represents an important step in our evolution as a leading biotech company.
We continued our global expansion as we advance launch preparations and support a potential approval for <unk> in Europe and progress with clinical trial preparation for deposit in Japan.
We also announced we'll be hosting a virtual R&D day for investors and analysts on September 29th to discuss our pipeline and new programs planned with significantly expanded this year with the acquisition of the other bio in March.
Looking at second quarter results.
Second quarter net sales were $453 million with impressive year over year growth from 173%.
The strong performance of the dependent relaunch was was the result of excellent execution, but it depends a team to resumed treating patients impacted by the government mandated first quarter just want supply disruption.
We converted new patients added during the disruption and drove new patient enrollment for them successfully.
The strong relaunch demonstrates the continued ability of our commercial team to execute.
We're able to rapidly restart existing patients on therapy once we resume supplier for Panther.
As we discussed last quarter 2 groups of patients were involved first patients who are on therapy, when the supply disruption began or disrupted patients.
And second new patients enrolled during or prior to the disruption who went to wait until after supply resumed in April to start taking to present.
The second group of patients added based on our continued promotional efforts during the fourth and first quarters of this year.
As expected the vast majority of disruptive pacer for zoom therapy in the second quarter.
New patients with Pep generated prior to <unk>.
During the disruption also started to present very rapidly.
The rapid access to therapy for both these new patients and the disrupted patients was driven by the execution of our field based teams who continue to remain in constant communications with physicians patients and site of care throughout the first quarter.
We're very pleased to see the strong growth for perhaps during the disruption a trend that continued post relaunch.
We attribute this continued strong growth in the pre interest demand due to the fact that our new and existing prescriber base continues to increase.
We're also seeing increased conviction from these prescribers with 2 thirds of them running more perhaps from the first half of 2021 than in the second half of 2020.
Finally, given the rapid relaunch, we've accelerated and significantly increase our investment in direct to consumer marketing initiatives with very positive results, notably from our branded and unbranded TV campaigns, which had been increasing awareness about <unk> and for peso.
Our goal for these national campaigns to increase awareness of to present and accelerate the speed to diagnosis and treatment.
We are enthusiastic about the prospects for compressor to help more patients address the serious debilitating and sight threatening aspects of TEP.
Given the second quarter was better than expected results and continued strong new patient growth, we increased our full year, 2% net sales guidance to more than $1.55 billion, which is near a doubling of net sales in the second year of launch.
As we discussed last quarter, our guidance continues to assume that third quarter is the highest net sales quarter in 2021.
This is a function of this disrupted patients completing treatment.
Patients with perhaps generated in the fourth and first quarters starting treatment after the April re supply.
And new patients starting treatment in the third quarter.
The outperformance for the re launch positions us for strong year over year growth for more than 50% from the fourth quarter. This year.
But continued strong pep generation after the April re launch.
So this is 1 of the most successful rare disease medicine launches ever.
There's still tremendous upside opportunity and we're focused on driving greater penetration both in the acute patient population as well as the untapped chronic opportunity.
We remain well on track for our peak global net sales estimate for more than $3.5 billion.
With KRYSTEXXA, we delivered outstanding results for the quarter generating record net sales of $130 million with a year over year growth from 73%.
A key driver of this quarter's strong growth was the increasing adoption of KRYSTEXXA plus immune modulation. The core part of our strategy to maximize the value of KRYSTEXXA and enable more patients with uncontrolled gout to benefit from the medicine.
Use of KRYSTEXXA seemingly modulation for new patients is now more than 40%, which we attribute to the greater clinical conviction of physicians, who use KRYSTEXXA plus some new modulation.
We look forward to the results for the mirror randomized controlled trial in the fourth quarter of this year, which is evaluating KRYSTEXXA plus methotrexate versus KRYSTEXXA alone.
Okay.
Our strong execution is driving growth in KRYSTEXXA prescribing physicians, both rheumatologists and Nephrologists.
For nephrology in particular, we created a dedicated nephrology sales team early this year.
They have already driven more prescribing nephrologists in the first half of this year versus all of 2020.
In addition, our messaging in the safety and efficacy of KRYSTEXXA is resonating with Nephrologist, which is reinforced by the positive interim results from our protect trial for kidney transplant patients who have uncontrolled gout.
We're encouraged by what we're seeing in nephrology with significant upside opportunity.
As a result of our execution KRYSTEXXA, perhaps a new patient starts both increased by strong double digits in the second quarter, which sets us up well for the second half of the year.
With a pleasanter, our humanized monoclonal antibody b cell Depleter, we generated second quarter net sales of $14.5 million.
Places indicated for the treatment of animal Westy, a severe rare relapsing neuro inflammatory autoimmune disease of taxi optic nerve spinal cord and the brain stem.
The timing of approval almost the height of the pandemic last year proved to be very challenging for <unk>.
We are planning and executing a relaunch of the medicine over the second half of this year.
<unk> the patient centric approach, we use for both to present and KRYSTEXXA.
Commercially we are focused on rebuilding and expanding the sales team and establishing a robust commercial structure to support their complex aspects of the plus non patient journey.
We made good progress on this in the second quarter and.
But expect to complete the commercial expansion by the end of the third quarter.
We're also leveraging support services, we built for Capella.
For example, as with TB specialists, many animal SD specialists do not have infusion capabilities.
We are leveraging our extensive prepare for the site of care network to support patient referrals from infusion centers, which is the GAAP and the initial opposed for the launch.
On the clinical side, we're investing in medical and scientific engagement to develop our scientific leadership position in animal SD.
This includes conducting further analysis of the clinical programs to expand understanding by the prescribing community differentiation as well as continuing to build a base of compelling real world evidence supporting the use of a pleasant.
In addition to presenting new data at several key medical meetings, which lives will touch on we have been actively reaching out to key animalist for your opinion leaders, who welcomed our entry into the market.
<unk> expressed enthusiasm for the differentiated approach of plasma offers and treating university.
It takes time to establish infrastructure.
Educate stakeholders about a new medicine.
In fact, we began our market preparation for depends on more than 6 months before we launched it.
With a pleasant we're off to a good start and expect to see the benefits of our new commercial organization and investments as we exit the year I'll now turn the call over to Liz.
Thank you, Tim and good morning, everyone.
The second quarter of 2021, Mark another quarter of progress in R&D, where we continue to focus on expanding our pipeline. We have 22 programs spanning the development lifecycle from preclinical to post marketing trials, which this quarter includes the addition of a new preclinical next generation uncontrolled gout program to our call.
Operations with Arrowhead.
Today I'll focus on the progress we've made on our key programs.
September will be doing a deeper dive into our key programs at our Investor R&D day, which will incorporate our evaluation of the other programs. We acquired in March along with new programs planned as well as our portfolio and overall R&D strategy.
A highlight of our recent progress is our global collaboration and license agreement announced in June with Arrowhead for Aero XD H, a discovery stage investigational RNA eye, RNA interference or RNA eye therapeutic being developed as a potential treatment for people with uncontrolled gout.
Got it.
RNA <unk> is a natural cellular mechanism that uses a jeans owns sequence for essentially turn that Gina silencing gene expression and regulating the production of protein.
Aero SDH Leverages this natural pathway of gene silencing, which in this case can then be used to silence the XD H gene in the liver.
<unk> is the primary source of uric acid and represents a clinically validated target <unk>.
As the leader in GAAP, we're uniquely positioned to successfully develop and commercialize the candidate that comes out of this program.
It remains a significant unmet need in treatment if uncontrolled gout roughly 1 third of the 9 million gout patients in the U S are treated with oral urate lowering therapies, but a meaningful portion of these patients do not respond sufficiently to treatment and therefore continue to experience painful and debilitating gout symptoms.
We expect to enter the clinic with <unk> within the next 2 years.
Moving to HCN 773 for in June we initiated our phase II trial for the treatment of systemic lupus erythematosus or SLE.
HCN 773 for us of Plasmacytoid dendritic cell our PDC depleter.
An anti IL 7 fully human monoclonal antibody with a differentiated mechanism of action.
In helping individuals' PDC as a president of low numbers driving inappropriate immune response to fight infection.
In individuals with certain autoimmune diseases Pdc's are found in high concentrations in disease tissues, resulting in significant inflammation and tissue damage that are the hallmarks of autoimmune disease.
Our SLE trial is evaluating <unk> 773 for in the treatment of people with moderate to severe forms of SLE and we expect to enroll approximately 195 participants.
The primary endpoint of the trial is the effect of HCM 77, 3 for compared with placebo.
In reducing SLE disease activity using big losses are commonly used index that measures lupus outcomes, we anticipate results in 2023.
In addition at the end of May our work on this mechanism was published in the Journal Science Translational medicine, showing the PDC depletion may interrupt the cycle of inflammation that causes tissue damage and diseases, such as lupus and other autoimmune and inflammatory conditions.
Moving to HCN 49, 20. This is a CD 40 ligand antagonist that blocks T cell interaction with C. D 40, expressing b cells, thereby disrupting the over activation of the CD 40 C. D. C. D 40 ligand co stimulatory pathway.
HCN 49, 'twenty is currently in phase III development for indications that involve immune over activation 1 such indication is so shogun syndrome, a chronic systemic autoimmune condition that impacts exocrine glands patient.
Patient enrollment in this trial continues our other 2 HCN 49, 20 trials in rheumatoid arthritis, and kidney transplant rejection are ongoing.
In June we presented results of an observational follow up of the phase <unk> study conducted in patients with active rheumatoid arthritis.
Purpose of this assessment was to estimate the duration of clinical improvement in trial subjects from beyond the 3 months safety follow up period. Following the left administered dose of HCN 49 and 20.
Well the interpretation of this study is limited in duration of benefit could not be defined in these studies. These early data suggests a possible longer term benefit of HCN 49, 20 of those patients with long term follow up most remained better than baseline for more than 2 years. After the last administered dose.
HCN a 2.5 our oral selective <unk> antagonist has shown early signs of clinical impact in fibrotic disease. We have 2 development programs for HCN 85, 1 in diffuse cutaneous systemic sclerosis, and 1 in idiopathic pulmonary fibrosis or IPF the sclerosis trial.
Screening now with enrolment for both trials expected to begin in the third quarter.
Moving to <unk>, we continue to see information accumulate in the literature about the successful use of deposit and chronic T. D. At this point there are 6 published patient case reports case series that detailed successful treatment with the pads are in 52 patients with chronic T E D, which is compared to the 41 acute T.
D patients treated with <unk> in the phase III clinical trial.
Also progressing with our phase for a placebo controlled trial evaluating <unk> for use in patients with chronic thyroid eye disease.
In this trial will be looking at chronic T. E. D patients who are 3 to 8 years post their T. E. D diagnosis as a reminder, it depends that has a broad indication for all T E D patients and physicians can and do prescribed to pass for chronic patients today the.
The objective of our chronic trial is to generate clinical data to better inform payers and physicians about the performance of to pass that in chronic patients.
Based on continued discussions with our principal investigators we've decided to increase the target enrollment to approximately 60 patients to increase the robustness of the trial, we expect enrollment to begin in the coming weeks and anticipate a data readout in the second half of 2022.
We continued continue to advance our to pause our subcutaneous administration program, which could potentially offer additional flexibility for patients by shortening the administration time and time spent with health care practitioners.
We hope to have initial discussions with the FDA later this year around our plans for bringing a subcutaneous version of <unk> to the market.
Regarding our clinical program for <unk> in Japan, we're on track to submit our trial design to the pharmaceuticals and medical devices agencies later this year.
For <unk>, our anti CD 19, humanized monoclonal antibody b cell depleter enrolled.
Enrollment continues in our 2 phase III randomized controlled trials, 1 evaluating <unk> in myasthenia gravis or Mg and the other in ITG for related disease.
MG is a chronic rare autoimmune neuromuscular disorder that affects the voluntary muscles of the body, especially those that control the eyes mouth throat and lens ITG for related disease refers to a group of disorders March by tumor like swelling and fibrosis as affected organs, such as the pancreas salivary gland.
<unk> and kidneys.
For the <unk> indication, we aimed to maximize our play is enough for patients by educating physicians and the medical community about its benefits a key component of our a pleasanter relaunch.
1 of our priorities is to continue to build a robust body of evidence supporting the efficacy and safety of the prisoner and M O S T.
We've participated in numerous medical meetings this year and continue to highlight key plays in our clinical data in medical journals.
These presentations and publications highlight 3 key findings first you analysis of long term data from the <unk> phase III and M. OSB trials showing that a pleasant provided sustained reduction of the N. M. O S. D attacks for 87% of a pleasant for patients for up to for years.
Second additional data demonstrate that a prisoner improved disability outcomes, regardless of baseline status attack history or disease duration.
A third set of data showed that patients on a place now with prior rituximab exposure experienced a meaningful reduction in M. O S T attacks.
Regarding KRYSTEXXA in the second quarter, we initiated our trial evaluating the concomitant use of KRYSTEXXA plus methotrexate for people with uncontrolled gout, who did not achieve a complete response when previously treated with KRYSTEXXA alone.
We continue to advance 5 clinical trials to increase the benefits and convenience of this medicine for patients.
So to recap our upcoming milestones. We currently expect our to peso chronic T. D trial to begin enrollment in the coming weeks and we expect to begin enrollment in our $2 <unk> to 5 trials in the third quarter.
We expect top line data for both our KRYSTEXXA mirror randomized control trial and protect trial by the end of the year and to pass the chronic data in the second half of next year.
In 2023, we expect data from our plasma trials in myasthenia gravis and <unk> for related disease, Our HCN 773 for SLE trial, and our HCN 49, 20 trial in Shogun syndrome.
Look forward to providing additional details on our key pipeline programs during our R&D day in September as well as updating you on our continued progress on our next earnings call I'll now turn the call over to Paul.
Thanks was my comments. This morning will primarily focus on our non-GAAP results unless otherwise noted.
Second quarter net sales were $833 million representing year over year growth of 80% are significant outperformance. This quarter was driven by the successful relaunch of the pathway and the continued strong growth of KRYSTEXXA as well as our other rare disease medicines.
Our orphan segment generated net sales of $747 million a year over year increase of 97%.
Orphan segment operating income was $321 million.
Net sales for the inflammation segment were $86 million and segment operating income was $47 million. We continue to focus on maximizing the cash flow generated from this segment to reinvest in our growth drivers and our expanding pipeline.
Our non-GAAP second quarter gross profit ratio was 88% of net sales.
Non-GAAP operating expenses were $362 million.
This included non-GAAP R&D expense of $81 million or 10% of sales and non-GAAP SG&A expense of $281 million.
Second quarter, adjusted EBITDA was $367 million representing year over year growth of 92%.
The non-GAAP income tax benefit for the second quarter was $36 million.
As we've seen in prior years, there can be variability in our tax rate across quarters.
We expect the tax rate in the second half of the year to be in the mid teens, which offsets the low tax rate in the first half and brings our full year tax rate in line with our projected low double digit rate.
Non-GAAP net income in the quarter was $381 million and non-GAAP diluted earnings per share for $1.62.
The weighted average shares outstanding used to calculate second quarter 2021, non-GAAP diluted EPS for 235 million shares.
Second quarter non-GAAP operating cash flow was $147 million.
As of June 30, cash and cash equivalents for $812 million, giving us significant flexibility to invest in our growing operations. This includes additional strategic transactions to further expand our pipeline.
The total principal amount of our outstanding debt is $2.6 billion with the earliest maturity in 2026.
As of June 30th our gross debt to last 12 months adjusted EBITDA leverage ratio is 2.3 times, which is an improvement from the March 31st ratio of 2.8 times.
We still expect to be at our gross leverage target of 2 times by year end 2021.
Turning now to our guidance.
This morning, we announced that we are increasing our full year 2021, net sales guidance range to 2.0 to 3.0% to 5% to $3.125 billion from $2.75 to $2.85 billion.
This reflects an increase in our full year to peso net sales guidance for more than 155 billion.
Presenting year over year growth of more than 89% at.
As Tim noted, we expect the third quarter to be to puzzles highest net sales quarter of 2021, and we expect the year over year net sales growth of more than 50% for deposits in the fourth quarter.
With KRYSTEXXA, we continue to expect net sales of more than $500 million for the year, representing strong year over year growth of more than 20%.
We are also increasing our adjusted EBITDA guidance range to $1.2 6 to $1.3 billion from 1.0 to 1.06 billion.
We continue to expect our non-GAAP gross profit ratio for the full year to be between 86 and 87%.
We expect 2021 R&D expense to be in the low double digits as a percentage of sales.
We expect non-GAAP net interest expense for the full year to be approximately $75 million.
We continue to expect a full year non-GAAP tax rate in the low double digits.
We estimate that our cash tax rate will be in the high single digits in 2021.
As always our tax rates could change significantly as a result of any acquisitions or divestitures, we may make or any changes in tax losses.
We continue to expect full year 2021 weighted average diluted share count to be approximately 235 million shares.
That I will turn it over to Tim for his concluding remarks.
Thank you Paul.
We continue to execute on our strategy to expand our pipeline for future growth and maximize our on market medicines.
We had a next generation gout program to our pipeline with the Arrowhead program and we initiated 3 new clinical programs.
We generated record financial results driven by proposal to KRYSTEXXA and our other rare disease medicines, where we see continued strong underlying demand.
As a result, we increased our guidance for full year net sales total company net sales and adjusted EBITDA.
2 weeks ago, we rang the opening bell at NASDAQ celebrating the 10th anniversary of our initial public offering.
With so much since then when we just had 2 on market medicines today, we are a leading high growth profitable biotech with a market cap of more than $20 billion.
Our portfolio of rare disease medicines that make a difference with thousands of patients and a robust pipeline of 22 programs spanning the development lifecycle.
As for much future growth to come.
It speaks to the value of having the right strategy remains focused on executing and having an excellent team of people driving it well.
We look forward to reporting on our progress again next quarter.
Now open the call up for questions. Thank you Tim Justin If you could please go ahead.
Thank you as a reminder, who asked the question you will need to press star 1 on your telephone to Joel Your question press. The pound key please standby will be compile the Q&A roster and once again that is star..1 if you would like to ask a question and our first question comes from Annabel from Omar from Steve.
Your line is now open.
Hi, Hi, congratulations on a great quarter as usual.
So I.
It would seem kind of silly to ask because it.
It has exceeded so tremendously, but could you provide a little bit more granularity around that.
The acute versus chronic penetration, we're starting to hear a little bit from the field that they're seeing more pushback on the chronic population as far as reimbursement is concerned. So just wanted to understand what youre doing there it's hard for reporting that group and what the penetration is there and then I'll close now.
You had quite a bit of data presentation.
At several conferences now what are you hearing as far as reception from community physicians now versus academic they still seem pretty comfortable with rituxan.
Sure.
I'll address the first and Liz can.
I'll touch on our place in the data.
Relative to acute versus chronic I think things continue to move well.
Same general framework of high single digits in the chronic population.
When we look at time from that original Pep generation to patients getting treated.
It's definitely faster than the acute population so that that has not changed other chronic does take a little more time, and there's more data requested and thats where.
You looked at what Liz reviewed we have 52 patients now that have been studied across a series of case studies versus 41 patients that we had in our phase III program. So we're generating significant data that data.
Certainly helps as we get requests from.
From the reimbursement process. So we continue to expect for chronic to take longer but those patients are getting through and and it remains high single digits as a percentage of the overall population.
1 note on a pleasant.
We are continuing to first of all complete the expansion. So we're we've been reworking our sales and overall field team, we're going through that expansion process and we expect to be done here in the third quarter. We are hearing there's a lot of rituximab patients being switched to biosimilars.
That doesn't open up the opportunity for physicians to have a dialogue and consider other options for patients, but we continue to have good initial discussions and analyst can speak to some of the data and what we're hearing there.
So certainly building the profile of a drug is a process and it takes time and it takes data, but some of the information we have been able to share recently are the kinds of pieces of information that they do seem to be resonating with physicians and other data, suggesting that there is long term efficacy that you can see you know a high proportion of patients who are.
We're going to tax free for up to 4 years data showing that there is an impact on disability and importantly, with respect to Rituximab is showing that patients who have had prior exposure to rituximab are able to do well on a pleasant and that includes those patients who had attacked while they were on rituximab. So again, it's a process it's a converse.
<unk>, but we do think we're generating and sharing the kind of data that is going to be meaningful for physicians. Thanks Annabel Justin next question. Please.
And thank you and our next question comes from David Schott from Jpmorgan. Your line is now open.
Oh, Hi, Chris Schott of JP Morgan.
Just a couple of quick ones for me I guess first on the implied fourth quarter sales for <unk> I think that's north of $2 billion annualized number I'm trying to get a sense is that a is that a good run rate to think about for underlying demand or is there still some of the restart business occurring in that fourth quarter number I was trying to get a better sense of.
How to think about 2022 and beyond and kind of how we're exiting the year and then the second question was just a little bit more color on the ramp that you're seeing in terms of the breadth of the physicians prescribing I think you had talked last year about how you were seeing some kind of.
Rapid adopters, who are having a lot of you spent a lot of physicians, who maybe like 1 or 2 patients on I think today, you mentioned kind of seeing broader physician adoption of the drug and its people should just any other dynamics that youre seeing with with depends on that front. Thanks, So much sure Chris Thanks.
With the primary target which is.
Bunch of plastic surgeons, we continue to see a greater penetration, we're seeing strong increase penetration neuro ophthalmic surgeons.
Surgeons.
And we are beginning to see some increase in both ophthalmologists are general ophthalmologists.
And then to a smaller extent the endocrinology community. So it was still a focused prescriber base, we have about 6000 targets.
And we continue to see more prescribers and.
And more prescriptions per prescriber, so across the metrics that we look at it we're seeing very positive trends in and if you look at the quarter, we not only converted.
<unk> disrupted patients, but the team did a great job of converting those patients that were on hold from the fourth quarter and first quarter into patient is being treated and that's what's going to drive.
Both.
Really 2 for third quarter.
Growth in the underlying growth that we're driving now is really what's going to set up that fourth quarter year over year growth that you commented on and relative to the $2 billion run rate. So we certainly think that's reasonable.
Chris Justin next question please.
Thank you and our next question comes from David and film from Piper Sandler. Your line is now open.
Right.
Thanks, So just a couple first on.
Chris that's a rig.
Regarding the.
The specialists Nathan I think you had talked about nephrology being an opportunity. So can you talk about what kind of traction you're getting.
In that community and just in general.
Are you noticing deeper penetration.
They're not just in nephrology, but also in Rheumatology and then secondly can you just talk broadly about business development, obviously with the yellow bile.
That's a transformative transaction.
And then you had a more recent transactions for an earlier stage product in GAAP.
But can you talk about your priorities how big can you go or are you willing to go going forward or should we think about your priorities being more bolt on assets bolstering the pipeline just wanted to get your thinking there. Thank you.
Sure David Thanks.
We continue to look at research and development based.
Addison and those type of bolt on acquisitions like we did with Arrowhead and <unk> for you to see any 2.5.
So that is the primary focus of our business development efforts.
We did with free online if an opportunity presents itself that strategically as well aligned is real it was we'll certainly.
Look at that that was something that with our balance sheet and our access to the debt capital markets. It was very easy for us to integrate that in so.
We won't rule out larger transactions, but our focus is certainly on on what we've been doing with feels like arrowhead in kersey on so you should expect to see more acquisitions or licensing transactions.
Like that to your question around KRYSTEXXA, we're really pleased with the.
The uptake as we refocused and nephrology with the dedicated sales force beginning in.
The early part of this year and as I mentioned in my remarks, we've seen more prescribers in the first half of this year versus all of 2020, So certainly seeing acceleration based on that focus and in up to half of patients with chronic kidney disease can have chronic uncontrolled gout.
So the patients are there, which is raising that awareness and making them.
Attuned to the fact that KRYSTEXXA can make a difference in those patients. So we're definitely seeing accelerating prescriptions.
1 of the things that if you look at the fact that we're over 40% of KRYSTEXXA plus immuno modulation right now is that it's an opportunity to go back to physicians early in the launch phase before we acquired KRYSTEXXA that didn't have a good experience and we're looking at our recruitment trial, but we're also seeing physicians.
Proactively say you know what with immuno modulation that is a reason to believe I can restart.
Prescribing KRYSTEXXA to a number of these patients. So we're seeing reinvigoration of Rheumatologists that havent written.
In the recent term so all of that is contributing to the strong growth we saw in the quarter and we expect throughout the rest of this year. Thanks.
Thanks, David Justin next question. Please.
Thank you and our next question comes from Ken Cacciatore from Cowen. Your line is now open.
Congratulations team on the performance of Tim wanted to ask about the advertising, it's really interesting to see obviously advertising on TV I'm guessing just says as much implications of raising awareness for clinicians as it does for patients. So just wondering as we're deeper into the launch are you seeing any signs of earlier diagnosis.
Kind of broader clinician base.
Looking at the disorder, maybe now earlier treatment. So as we think about the 15% to 20000 patients that you've cited kind of on an annual basis is there any movement there given that the debt your advertising and then obviously nice commentary around demand, but just more specific around the enrollment forms that we've seeing that.
Nice steady kind of month over month.
Increase and then lastly on up listener.
Really great clinician feedback I know you've talked about the size of this product.
Before as you as you work through and continue to invest behind it. It does looks like this could be a $1 billion and above product opportunity just in the lead indication in any more kind of commentary as you guys have dug in a little bit deeper and invest behind it thoughts on peak and just the primary indication. Thank you.
Sure with the <unk>, we see it as a $1 billion opportunity across all indications with animal SD and.
<unk> seen it gravis as well as ITG for related diseases. So certainly we're off to a good start.
<unk> had some good growth in the quarter, but certainly need to complete our expansion here over the third quarter and we expect to see the kind of growth that we're used to seeing from our business as we exit the year. So I'm feeling really good about how it's starting to set up the type of people that we're adding to that organization.
From a DTC perspective, and overall promotion 1 of the things that we knew early on as patients.
Can get misdiagnosis frequently with depends on or kind of get loss from the endocrinologist or in the ophthalmologist office. So we knew we had to not only drive the <unk>.
Primary effort with our sales force or with Oxytocic surgeons, and neuro ophthalmic surgeons, but we have to activate patients and thats about.
Net earlier diagnosis and ultimately getting to the right specialists or DTC effort is about getting physicians are getting patients to seek a specialist and get appropriate treatment. So it's not about earlier in the course of the disease, it's really about getting to that 15 to 20 sales and continuing to increase.
Penetration in all of the metrics, we look at our DTC, whether thats the unbranded focus on.
Treating an understanding TEP and getting the right specialist involved.
Both debt and the Topaz branded advertising are outperforming typical benchmarks and continue.
To generate strong growth in our specialist.
Specialist finder.
Hits and patients seeking to get the right treatment. So all of that is performing extremely well in.
For the quarter and throughout the rest of the year, we're going to continue to increase our investment in PTC, because we see it as a.
A strong growth driver for to pencil.
Great. Thanks, Ken Justin next question. Please.
Thank you and our next question comes from Jason Gardner from Bank of America. Your line is now open.
Good morning, Thanks for taking my questions.
So my question was on the the nature I publication regarding Petro and chronic TDD and your thoughts.
How that impacts your thinking for the soon to be initiated phase 4 study in the representative Mrs.
Those patients in which you saw in terms of variability patient to patient in terms of the level of response and then secondarily to that is this.
<unk> data that you can start to leverage in the field.
Chronic TD is not off label, so I imagine.
It's something that is certainly permissible for physicians to use net growth in that setting and we did see a lot of momentum for KRYSTEXXA KRYSTEXXA methotrexate as investigator data started to accrue. So just sort of wondering how this data emergence of data could be a tailwind for the temporary franchise. Thanks.
Thanks, Jason.
I think you hit it accurately in your commentary and that we've got 52 patients across.
Series of case studies that are chronic patients compared to the 41, we had in our whole phase III program treated with to purchase so.
That's data it is within our label to discuss that so we see a lot of interest like we did with KRYSTEXXA and the early case series that generated a lot of interest in.
The community. So that's all good data, it's especially helpful in the reimbursement and the appeal process. It typically patients go through and getting treated for chronic thyroid eye disease. So all of that our positive trends with do you want to speak to the nature publication.
Yeah, absolutely, it's been interesting and exciting frankly to watch the literature, that's accumulated over the last year or so around it has a inning in chronic sorry red eye disease.
Including the nature I publication, what we see generally speaking across these is good results in a variety of chronic to 80 patients and that is important because it is a heterogeneous population. So that's been very reassuring to your point you know, while we do see good strong responses, we do see variability and so we have taken that into account as <unk>.
Well as discussions with our principal investigators when we made the decision to increase the size of the trial to account for the possibility of larger variability, but overall, we're really heartened by what we're seeing in that publication and just across the literature generally in chronic T D. Thanks.
Thanks, Jason Justin next question please.
Thank you and our next question comes from Gary Nachman from BMO capital markets. Your line is now open.
Okay.
Hi, Good morning first on the strong recovery for its it has a did you have to expand the infusion network at all to meet the increased demand is that where it needs to be and are you still working on home infusion.
Talk more about how you leverage that with the Clinton are on that relaunch like you talked about earlier.
And then on new place now with the relaunch and MLS. The are you satisfied where reimbursement is right now or does that need some improvement before the end of the year and could you potentially see some off label use where b cell depleters might be used maybe even in Mg our ITG for even before.
That data available.
Thanks, Gary.
From a site of care standpoint, I believe we have over a thousand site of care.
Institutions are within the network.
That are currently involved in infusing to present. So there is not there has not been a bottleneck there at all and we don't see that as a rate limiter home infusion is generally driven by payers.
And something that we don't have a lot of control around at this point in time. So we are seeing it here and there but.
That's going to evolve over time as different payer dynamic dynamics evolve.
Relative to reimbursement on a please know that we're not seeing that as a rate limiter.
Just aspect is getting our promotional activities and our broad field based organization in place. So what's going to drive that is us getting the type of organization in place that we believe is needed to drive the uptake in animal SD.
I have not heard of any.
Use outside of animal SD.
And we don't see that as a near term driver it's really about.
Getting the expansion in our field based organization done by the end of the third quarter and getting back to just executing and driving that differentiation that are a lot of our recent clinical data has continued to show as a positive for a place for them.
Thanks, Gary Justin next question. Please.
Thank you and our next question comes from the Van <unk> from Citi. Your line is now open.
Hi, good morning, Thanks for taking my question.
Can you help us with the evolution of tidbits out in Q2 during the quarter.
Television campaign.
Any benefits.
Patient enrollment forms.
And then on chronic Ted could you comment in terms of Proptosis reduction.
And do you think payers, becoming aware of this case study.
Okay.
As far as the awareness of the case studies that debt is going to continue to increase over time.
The awareness.
On the.
The chronic TD is around.
Typical prior authorization process, an appeal process that patients go through where that data is then provided upon request. So that is definitely part of the process relative to peers.
In the second quarter, the vast majority of the disrupted patients were.
Treated or initiate re initiated treatment on average they were about halfway through there are 8 infusions.
And we also were able to rapidly convert that.
Patients, whom we were able to start who were generated from where perhaps were generated in the fourth quarter and in the first quarter and we saw great progress there.
Thanks.
Justin We've got time for 1 more question. Please.
Thank you.
And our last question comes from David Steinberg from Jefferies. Your line is now open.
Thanks, Good morning.
My first question relates to operating margin it looks like you posted a very strong quarter.
Among other factors.
Mid forties I know that this is intended to be an investment year.
Any thoughts on where op margins could go over time, they reach the 50% level.
Secondly, another follow up on your DTC ads.
I know, Tim you mentioned they've been very productive.
1 of the Aki plastic Kols, we talked you said early in the launch about a third of the patients who came in you had a piece of paper that said depends and because of word of mouth and I'm. Just curious and you just said <unk> had a couple of patients who came inside ads and he has given them a prescription just curious I know, it's a soft metric but.
What percentage of the patients do you think are coming in and requesting a script simply because they saw the TV ads and finally.
Ex U S. I know you've highlighted the peak sales from the Asian opportunity and you are adding infrastructure in the EU any update on cash.
Gaining orphan exclusivity in Europe in the coming months.
Sure. Thanks, David.
I appreciate it.
With Oh the.
DTC looking at we don't have a metric on percentage of patients that we are qualitatively hearing.
Net patients are responding and the key thing there is really about driving patients to a specialist funds. So they can find someone who.
As burst and regularly treats thyroid eye disease, and we're seeing very good progress there and visits to the specialist finder qualitatively are we are hearing some of the same stories that you are.
So don't have a specific.
Number there.
From a <unk> standpoint with <unk>.
International markets outside Europe, we continue to prepare as was talked about.
Getting progress on the protocol for <unk> in Japan.
Continue to ramp up our prelaunch efforts for placement in Europe.
We don't have an update on orphan drug designation for <unk> in Europe at this point in time.
Margin on margin as Paul.
Yes, David So you're right we expect.
Margin this year in the low <unk> when you look at our guidance for.
The midpoint of the other EBITDA and sales guidance and we expect to continue the margin expansion next year, 'twenty, 2 and beyond as well.
We absorbed the Ela and all these R&D programs, when we'd really drive KRYSTEXXA to pass towards their peak sales and we would expect to get to.
A rare disease like margins for the company, which we've said is near that 50% Mark.
Thank you David and thank you Justin that concludes our call. This morning, a replay of this call and webcast will be available in approximately 2 hours I appreciate you joining us.
This concludes today's conference call. Thank you for participating you may now disconnect.
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