Q2 2021 Flexion Therapeutics Inc Earnings Call
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Good afternoon, ladies and gentlemen, and welcome to the flexion Therapeutics second quarter 2021 financial results Conference call. At this time all participants are in a listen only mode. We.
We will be facilitating a question and answer session at the end of today's call.
If at any time during the call you may acquire any assistance. Please press star followed by zero and organic and we'll be happy to assist you.
I'll now turn the call over to Scott Shaw Flexion, Vice President of corporate Communications and Investor Relations.
And.
Good afternoon for sure.
For a while ago, we issued a press release announcing our second quarter financial results.
That press release, and our latest the commercial metrics and slides can be found under the investors tab on the company's website and a replay of this call will be accessible there shortly after its conclusion.
Today's discussion will be led by flex and as Chief Executive Officer, Dr. Michael Clayman, and he is joined by Melissa Layman collections, Chief Commercial officer, and Fred Russell Flexion Chief Financial Officer.
Today's conference call, we will be making statements relating to future financial and business performance market conditions strategies, and 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.
And 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 collection business financial conditions and results of operations are contained inflections filings with the SEC as well as on flex and the website.
I will now turn the call over to Mike Clayman.
Thanks, Scott and thank you all for joining and the press release, we issued this afternoon, we provided a number of important updates on our commercial performance.
<unk> progress and the recent debt refinancing all of which we will discuss in more detail on today's call. However.
However, at the begin I would like to officially welcome Wil Anders our new Chief Medical Officer will joined US in early July and his presence and leadership is already being felt across the organization and.
And I look forward to his important contributions and the years ahead.
Moving to our commercial performance, we recorded $28.2 million and zelle read of net sales during the second quarter, which represents solid growth of 15% over the first quarter. This result was in line with our expectations and we are reiterating our full year's they'll read of sales guidance and the range of 120.
The $130 million barring any unanticipated impacts from COVID-19, and the second half.
Stated simply we believe is already as of product that makes a real difference for patients confronting OA knee pain.
And our charge is to ensure that we are bringing its benefits to as many of them as possible and thats exactly what Melissa and her team are focused on they've been making excellent progress executing against our 3 commercial priorities and I will look to her to provide more color on those efforts and to share perspectives from the field on patient for.
Lowe's at health care practices.
Before I move to recent clinical progress I want to acknowledge the impact of Fred Driscoll has made since rejoining us as CFO and June under his leadership, we have introduced important cost containment initiatives across all functions within the company to ensure that we are scrutinizing every aspect of our spend and utilized.
And our resources judiciously.
Consistent with this we have curtailed our hiring with each new position requiring justification that it addresses and immediate and critical need.
In addition, we've bolstered our cash position by.
By recently refinancing our term loan, which in non dilutive fashion and extends our estimated cash runway into 2023.
I'll look to Fred to provide more color on that agreement and our financials and just a few minutes.
With respect to our lifecycle management activities and clinical progress expanding <unk> label to include shoulder OA remains a priority while shoulder OA is the smaller total addressable market the knee OA with roughly 600000 injections each year versus 8 million for the <unk>.
<unk> of effective pharmacologic treatments and shoulder OA creates the potential for <unk> to play of particularly meaningful role and helping this patient population manage their pain and improve their function.
We remain on track to initiate a registration trial of <unk> and shoulder OA before the end of the year.
Regarding our pipeline, we are efficiently progressing both FX and 301 and FX 201.
FX 301 is our investigational locally administered thermo sensitive hydrogel formulation of the NAV, 1.7 inhibitor fun of pied targeted as of peripheral nerve block for control of postoperative pain.
Unlike currently available nerve blocks, we believe the unique formulation and selective pharmacology of FX 301 have the potential to deliver at least 3 to 5 days of effective pain relief, while preserving motor function, which could enable early ambulation rapid discharge from the hospital.
And enhanced rehabilitation following musculoskeletal surgery.
We have fully enrolled the single sending dose portion of our phase <unk> proof of concept trial of FX 301 in patients undergoing button. The enacted me based on the data of decision will be made whether to expand the selected dose and volume cohort by another 36 patients results from this trial are.
<unk> by late this year.
With respect to FX 201, our investigational locally administered gene therapy, which aims to provide at least 6 to 12 months of knee OA pain relief and functional improvement, while also potentially modifying disease progression and June we fully enrolled the high dose cohort in our phase 1 single.
<unk> ascending dose trial. The multicenter open label study is evaluating 3 doses low mid and high of FX 201, and cohorts of 5 to 8 patients for 2 years. In addition, and the first quarter of 2021, we expanded the trial to include up to 20 additional patients in both the law.
Low and mid dose treatment groups to date, the most commonly observed treatment related adverse events and the trial had been pain swelling and of fusion in the injected knee. While these events had been tolerable. We recently made the strategic decision to investigate pretreatment with an intra articular injection.
And of and immediate release steroid prior to FX 2 O..1 administration as a means of mitigating these potential aes.
Vector based gene therapies and are known to elicit acute immune reactivity and the approach we are investigating and similar to the way other gene therapies employee pretreatment with immune suppressing steroid regimens to mitigate of acute aes and potentially improve durability of response.
As of August 1st 40 patients have been treated across all cohorts, including the expansion groups of the low and mid doses in total we expect to treat up to an additional 38 patients across all dosing cohorts with the pre treatment regimen of <unk>.
Assuming the high doses cleared soon for expansion by the data monitoring Committee.
Additional data Readouts are anticipated by the end of 2021, including the interrogation of Sanofi Youll fluid from patients to assess biological activity of FX 2 of 1 locally and the joint and potential correlation with clinical endpoints over time.
At this point I'll turn it over to Melissa.
Thank you Mike.
As Mike mentioned net sales and the second quarter with $28.2 million, which represents 15% growth over the first quarter overall.
Overall, we were pleased with the performance and we feel very good about the opportunity for continued growth from the second line.
Sure.
Just last week, we conducted another round of survey for the sample of <unk> 25 per vessel for the current and parts of the curve it on orthopedic practices the.
The respondents indicated that throughout the second quarter patient with the officers for back to about 90% of pre COVID-19 level.
Based on the recency of the survey, we were able to obtain a sense for it and how the proliferation of the very well could impact practices and approximately 20% of practices surveyed indicated they have seen a recent reduction and both surgical and pay for play.
And the event that we see more states for more major metropolitan areas reintroduce the lockdown there could potentially be further disruptions to orthopedic offices.
We are monitoring developments closely and our teams are prepared to work remotely should that be required and individual territory.
Moving on to our 3 strategic priorities and Luca.
Occasion of the patient the way pricing and physician reimbursement and positioning and market segmentation, we are making progress against each.
With regard to our first priority amplification of the patient the way we have revised our messaging to even more effectively articulate and emphasized the unique product attributes of <unk>. The distinguish it from other into articulate injection and we are rolling out several new tools and programs intended to enhance physician awareness of the unique patient experience that's already delivers.
Related to our second strategic priority and August 2nd we implemented a 5% price increase first of all of which set the wholesale acquisition cost from $570 to $598 and safety.
This is the first price increase we've taken since the product was introduced in 2017 and it is supported by market research the indicate such and increases in line with the perception of the value of the rather delivers to patients and providers.
In conjunction with the price increase and we're also refining our rebate program and of introduced op income.
The discount from the.
The Red is a buy and bill product and off invoice discounting can help smaller accounts and particular adjusted the change in price and more effectively manage the cash flow.
Since we are confirming and off invoice discount program with the price increase we are not anticipating the implementation of this strategy will have any meaningful impact on net sales for the remainder of this year and.
Additionally, we are now equipped the contract with the accounts that have the ability to and interest in <unk> and larger volume.
Our third strategic priority largely centered on our footprint optimization effort, which will be implemented later this year and I expect to be able to share more specific details about these efforts in coming months.
Moving onto our commercial metrics.
On slide 2 here, we have provided a dashboard view of the current quarter versus the prior quarter and the current quarter versus the same period and the prior year.
And you can see and the bar charts net sales and the second quarter grew by 15% over the first quarter of this year and by 82% versus Q2 of last year. When we were facing the height of the COVID-19 impact.
We also saw growth and demand for the Radisson and health care providers, the Q2 demand growing by 7% over the first quarter of this year and by 55% as compared to the same quarter over last year.
And the second quarter 2105 accounts purchased Silverado as compared to 2044 accounts and Q1.2021 and of the accounts that purchase is already in Q2, 90% purchase product and the prior quarter.
On slide 3 and 4 we highlight quarterly net sales for the quarterly demand respectively.
As a reminder, we primarily sales of relative specialty distributors and we recognize sales upon receipt of product by the distributors and <unk>.
And refers to the actual orders placed by accounts, such as physician practices clinics and certain medical centers of hospital with the specialty distributors.
On slide 5 we break out purchases by volume and accounts and discrete quarters as a method to more clearly illustrate how our business is moving from quarter to quarter.
This new shows you the total number of units purchased within the quarter and volume 1 to 100.101 to 300 and 301 question on that as well as the number of accounts purchasing at these volumes within the quarter.
And Q2, roughly 42% of the already units for purchased by accounts of quarterly volumes of more than 100 unit.
We believe this is the result of our team's continued focus on growing utilization and the accounts, which hold the greatest purchasing the potential.
We know that broader use of the productivity starts with the prescriber, realizing and appreciating the full benefits of what it provides for an individual patient the eliminating the patient experience.
From there they expand use of different patient types and once convinced of its differentiated benefits extending the use of the writer to other physicians within the practice.
And Q2, 114 accounts purchased and the top 2 tiers up from 99 of accounts in Q1 and using their historical quarterly intra articular injection volume as a proxy for the market opportunity. We estimate the rate of penetration. Among these 114 accounts, maybe as much as 48%.
As I mentioned on the last call. This does not suggest that those accounts of fully adopted for letter rather is and it is an illustration of how our increased focus on the accounts with the greatest potential for increased adoption can accelerate the erratic growth.
We know the read it as a product that is making a real difference and the lives of people, who can kind of OA knee pain and.
The stories, we hear on a daily basis reinforced the value of this medicine can half of patients in need and we are working to make them more visible for the individual physicians and practices that manage these patients.
We remain confident that our passion for getting go read it to more and more patients coupled with our expectation of successful execution against our 3 strategic priorities will enable us to realize the alright its true potential.
With that I'll turn it over to Fred.
Yeah.
Thanks Melissa.
Mike mentioned, the <unk> net sales and the second quarter were $28.2 million, which reflect the gross to net reduction of 18, 5%.
This reduction includes rebates to health care providers that are variable and based on the volume of product purchased.
Total provider rebates accounted for a gross to net reduction of approximately 9% and Q2 and the remaining gross to net reduction of approximately 9.5%.
Is comprised of distributor and service fees returns reserve and mandatory government discounts rebates, including Medicaid 340, B institutions, and Veterans administration and department of Defense.
At the end of the second quarter, the aggregate inventory held by specialty distributors was slightly above the 1% to 3 weeks time, we target.
We reported a net loss of $22.2 million for the second quarter of 2021 compared to a net loss of $32.6 million for the same period of 2020.
Our loss per share for the second quarter of 2021 was <unk> 44 cents compared to 76 for the same period of 2020 day.
This improvement is due to a variety of factors, particularly the impact of Covid on our operations last year. However, I can say that cost containment is the top of mind consideration for our management team.
Cost of sales was $5 million and $5.5 million for the 3 months ended June 32021, and 2020, respectively.
Gross margin was $23.2 million or <unk>, 82% compared to $10 million was 65% of sales for the 3 months ended June 32021, and 2020, respectively.
The improvement year over year.
Flex the scale up and production in 2021 as compared to the shutdown and unabsorbed overhead cost and 2020 caused by Covid.
Importantly, we saw continued improvement and our gross margin rate in Q2 at the asphalt mentioned, 82% compared to 75% in Q1, as we move towards a more normalized manufacturing level.
Regarding research and development expenses, they were $12.7 million and $12.5 million for the 3 months ended June 32021, and 2020, respectively. The.
The net result reflects the decrease of $900000 and development expense.
Due to the reduction is already of lifecycle management activities, and a decrease of $500000 and salary and other employee related costs and stock based compensation expense related to lower head count the.
The decreases were offset by increases of 600000 dollar and.
$400000, respectively related to the FX <unk> and FX 301 pipeline programs due to increased clinical trial activity.
Selling general and administrative expenses were $27.4 million and $24.7 million for the 3 months ended June 32021, and 2020, respectively.
Selling expenses were $18.9 million and $16.8 million for the 3 months ended June 32021, and 2020, respectively. The year over year increase of $2.1 million was primarily due to the partial resumption of industry conferences and physician speaker programs.
And increases in business travel during the quarter.
General and administrative expenses were $8.5 million and $7.9 million for the 3 months ended June 32021, and 2020, respectively, which represents an increase of $600000.
Interest income was $200000 and $100000 for the 3 months ended June 32021, and 2020, respectively interest expense was $5.2 million and 5.0 million for the 3 months ended June 32021, and 2020, respectively.
As of June 32021, the company had approximately $131.2 million and cash cash equivalents and marketable securities compared with $175.3 million as of December 31, and 2020.
On July 29 for 2021, we entered into a second amendment to our amended and restated credit and security agreement with Silicon Valley Bank, Midcap Financial Trust and underwrite and other lenders providing for a non dilutive term loan of up to $55 million available at closing and of <unk>.
<unk> credit facility of up to $25 million.
We borrowed the available amounts and used $48.1 million of the proceeds to repay our outstanding 2019 term loan and revolving loans.
The credit facility requires interest only payments until August 1.2023, we anticipate that the new agreement will result in and approximately $59 million improvement to cash flow through 2023.
Net of the term loan proceeds payment of the outstanding 2019 term loan balance and deferring principal payments for 2 years.
As Mike mentioned, the refinancing strengthening of our cash position and provides us with an estimated cash runway into 2023.
Okay.
Finally, with respect to our operating expenses, we continue to guide full year, opex, including cost of sales and R&D expenses and SG&A expenses in the range of 195 million to $205 million.
However, as Mike mentioned and my first 60 days back as CFO, we have initiated a deep dive review into all aspects of spending and the company with the goal to reducing our operating costs.
Once complete we will have more to say on this and the future quarterly update.
At this point I would ask the operator to open the line for Q&A. Thank you.
And they and you.
To ensure there is adequate time to get to everyone participants are asked to limit themselves to 2 questions. If you have additional questions. Please rejoin the queue and we will come back to you as time permits. Thank you and our first question is.
Going to come from Elliot Wilbur from Raymond James Your line is now open.
Hi, guys. This is actually Michael <unk> on for Elliot Thanks for taking my questions.
So first 1 I guess the decision to Pretreat ethics to all of them with the steroids.
Is that simultaneous with the administration of FX too of 1 or is there a GAAP.
And then also is there potential to maybe use like silverado versus.
For the IR steroid and.
And then secondly in terms of the gross to net trends for Silverado.
I believe you guys were somewhere in the ballpark of like 18% last quarter, just wondering where that is and where you see it trend and in the near term.
Any update on rebate strategies and successes, you're seeing and would also be helpful. Thanks.
Okay.
And I'll take the the.
The first 2 questions and I'll.
Pushed the <unk> the next 2.
Questions to Fred and Melissa.
So in terms of the timing of the steroid injection, it's done immediately prior to the.
The FX 2 of 1 injection and.
What we're trying to accomplish here is to address a short term.
And then on in terms of adverse events. So we don't think that that requires <unk> and as a result, we're going with a steroid debt has been used and the clinical trials that have demonstrated of short term and immediate release steroids and has demonstrated its ability of your quell these reactions.
Yeah.
Fred.
And I think the next question could you just repeat that the the next question from sorry.
Gross to net where you guys were last quarter, and then trend and near term with the like quick let's say up until 2022.
Yeah.
Yes, the gross to net and I think as we said and the in our script was $18.5 per cent for the quarter.
I think what Melissa I'll turn it to you to just to give some updates as to as to where you think of where we go from here.
Most of you might be on mute.
Sorry about that can you hear me.
And I'd say.
We're going to give forward looking guidance on where we anticipate gross to net will go.
Yeah.
Yeah.
Oh, and sorry, I should get back to me again, probably Q for the third question right, which I believe is around rebate and.
And whether we've seen positive results coming from rebates. So as you know we have been and we have deployed a broad based rebate program going back to the third quarter of.
2019, I would say that we have seen great success with that rebate program, which is why as I referenced and prepared remarks earlier today that are part of the new pricing strategy that we rolled out and just earlier. This week included the continuation.
Of the of our rebate programs.
Sure.
Okay.
Got it and think and.
And thank you.
And our next question comes from Madhu Kumar from Goldman Sachs. Your line is now open.
Oh, Hey, guys. Thanks for taking our questions. So first 1 kind of following up on the earlier question, but the FX 2 out of 1 kind of stepping back and bigger picture, what do you need to see in terms of the tolerability profile for the for the gene therapy to kind of give you confidence to move forward into the largest scale of R&D.
The mice trials, and then kind of parallel and debt what do you see in terms of efficacy and I guess, obviously all of a frame of reference is the.
The already here like what do you need it seem to me and advocacy for I think 2 of 1 to 1 of your seed moving forward with 2 of 1 randomized controlled trial and I have a follow up after that.
Yeah.
Fair questions Madhu and.
Bottom line is what we need to see in terms of safety is the substantial mitigation of the adverse events and what that looks like exactly we've not reduced to some.
[noise] formulaic.
Set of.
The observations we have data now on all 3 dosing cohorts and.
And what we believe is that this approach will make a meaningful difference in terms of reducing the <unk>.
<unk> of those and even though they were modest they were all mild to moderate.
We expect that the severity and the mild to moderate characterization will be even less so we're going to look at the data I think we will know relatively quickly whether this intervention is making the kind of the difference that we would hope and expect it but in terms of efficacy, we're going to need to see meaningful pain.
And relief and functional improvement clinically meaningful pain relief and functional improvement.
For at least 6 to 12 months following a single injection.
Okay.
Okay, and then a follow up for and for Chainsaw of Fred over there and.
We think about kind of where you think cost savings can occur how much of that and could potentially be on the product pipeline from the clinical development and front as compared to kind of improve the efficiency of.
And of selling of is all right and how are you guys thinking for that right now.
Yes Madhu.
I think we really need to see it.
Mike just said, we need to see over the course of the remainder of the year, where the where the clinical datasets come out on 2 of 1 and 301 as we guide towards and.
And think about how research and development expenses.
Our move into the into next year.
But as I said, we are we're really conducting an extensive review of all of our operating expense spending across every sector within the company and.
And once that's completed we will have more to say about the impact of.
About debt in an upcoming call.
Hey, great. Thanks, everyone.
Thank you.
Thank you and our next question comes from Daniel Busbee from RBC capital markets. Your line is now open.
Hi, good afternoon, and I've got a couple on zelle radar so.
So first can you talk a little bit more about your current assumptions for patient flows and the second half of 2021 relative to the 90% level you referenced for the second quarter and second.
And can you provide any qualitative color and the expected cadence of the rate of sales in the third and fourth quarters.
Is it reasonable to assume a fairly linear trend or are there other dynamics at play that could influence that.
Sure Danielle I'm going to take those in reverse order and.
So you know I think.
You know with regard to the second half.
And historically, we do see our song of sales in Q3 and Q4, we're continuing to guide for full year net sales and the range of $120 million to $130 million for <unk>.
Not providing quarterly guidance at this point, but you can go back and look at our historical quarterly cadence to get a sense of how the quarters typically fall out.
And with regard to your question around patient flows the practices and the back half of the year, you know I think kind of set it and the prepared remarks that we saw an increase of patient plays the practices and the last feel the survey versus the 1 prior going from 85% and 90%, but we also at the same time, though.
The respondents about whether they anticipated they would see if the.
Worsening or for anticipated they would see any coming declines and flows again as a result of of the proliferation of Covid and what they told US was you know a third of the responders that we spoke to said that they were seeing the.
The decrease a a real kind of decrease in patient flows of between 40 and 50%.
That was the only a third of the of the survey responded that we spoke to which in total with 25.
Okay. So fair to say you've factored some of that into your second half assumptions.
I think as we said and in prior calls right, we had always kind of.
And that and Ah patient plays the practices practices of remain around 80% of the mid part of the year with a modest improvement and that in the back half of the year.
And to 90, now and certain parts of the country and they may be back down to something less than that so I think it's fair to assume that.
Adequately baked into our plan.
And for the rest of the year.
Got it thank you.
Thank you.
And our next question comes from Gary Nachman from BMO capital markets. Your line is now open.
Hi, Thanks for taking the question.
And then <unk> filling in for Gary.
So, whereas the router or there are a lot more new accounts, we're able to tap into and what will be the focus going forward once they are.
Okay.
So I think I would say that theres not a lot more new accounts for us the tap into you know where for years and the market and we do continue to bring on new accounts. The kuna of I'll say, you know of 102 of 120 quarter over quarter, but that number is declining over time, because there are fewer new accounts the come on as we start to penetrate more and more accounts.
And I would say that our primary focus going forward is to deepen or increase our penetration among our existing user accounts and part of the work that I've talked about in the past related to our footprint optimization and needs to get exactly at that idea of helping us to identify and understand which accounts out there that are already.
The existing users have the propensity to move further and faster and there's a lot of adoption and and increasing our focus around those types of accounts. We believe is the is the right way to accelerate growth and the near term.
Yeah.
And thank you.
Okay.
And our next question comes from Serge Belanger from Needham and company. Your line is now open.
Hey, good afternoon.
First question for Melissa.
And do you believe and there is still kind of pent up demand and the market either from a P.
Patients, who have had their knee replacement surgeries, postpone or where patients who have stayed away from seeing the physicians.
Over the last year and can that pent up demand.
And to the ER, some red a volume and the second half.
Hey, sorry, just the good question I think it's a little bit of a complicated answer it if we had stopped at the response from our survey that said the patient flows the practices we're back the 90%.
And my answer to that would have been there.
And still be a little bit of pent up demand out there that has yet to be realized by us I think.
And realize the majority of the pent up demand as we were sort of and the mid and latter part of last year, but when you add to that statistic the 90% of patient flow statistic from the recent survey when you add to that that there was a not insignificant number of respondents who actually said that they were seeing real time decreases and their patient for it because of Covid.
Proliferation.
The tune of 40% to 50%.
I would suggest that.
Whatever pent up demand may still be out there that we would have otherwise been able to realize and the back half maybe.
And you could buy of what's happening and pockets across the country relative to you know.
Practices slowing down and elective procedures being delayed.
Yeah.
Okay and.
And my second question.
And again from Melissa or maybe it's.
For Fred related to the recent 5% price increase it.
It doesn't sound like you'll be able to realize it in 2021.
But.
When you do what amount of the price increase.
And you think will impact the net price.
Well I think I think there's a bit of of complex answer as well because as you heard in the prepared remarks, not only did he brought a lot of price increase but we also roll that off invoice discounting.
And in the near term I E sort of 2021, we anticipate that the material impact from the combination of those 2 things and will be you know it'll be a wash.
As we go further out and you know contemplate what we'll be doing from a from the price increase and discounting strategy and in 2022, we'll certainly share of those insights with you, but we're not prepared at this point to talk further than what we're what we planned and what we've executed for 2020.1.
Okay.
Thank you.
Mhm.
And thank you and ladies and gentlemen, if you have a question that the star 1 again, if you have a question and you Star 1 and our next question comes from Patrick <unk> from H C. Wainwright. Your line is now open.
Hi, Thanks, and good afternoon, just a follow up regarding FX 301, I'm wondering if you can remind us the advantages in terms of the formulation of FX 3 of 1 versus the prior attempts of this pathway and secondly should we expect to have a better understanding of those advantages. After part 1 of part 2 of the phase 1 trial or would we need additional.
Data from our phase II trial, and then what would you need to see from the from the phase 1 trial overall to give confidence to move forward and the phase 2 of phase 2 program.
Okay got it thanks for thanks for those.
Questions, Let me just start out by saying the.
FX 301 is unique in 2 dimensions.
First it is formulated and the thermo sensitive gel that is liquid at room temperature and gels and body temperature, so that when the formulation with the active and it is injected around the nerve of interest of the gels within a minute and creates a depot for prolonged payout, thereby supporting our and <unk>.
<unk> vision for the product of providing at least 3 to 5 days worth of meaningful pain relief that would already set it apart.
And secondly, the active is the selective sodium channel blocker that blocks channels on.
The sensory fibers spares motor fibers and translates into the.
And the potential for pain relief without compromising motor function that would also be unprecedented in the field. So between the 2 where we're super excited about the potential for this product for.
Generate the kind of profile that could make a real difference for many many patients and there are millions literally millions of peripheral nerve blocks that are done each year.
The data we are getting from the first phase of this trial will allow us to make a decision about expanding of the trial.
And by another 36 patients.
We believe that by the <unk>.
Assuming the data support expansion and we'll know that and the relatively near term. The data is on this long Clinton trials Dot Gov.
12 patients per cohort for different dosing cohorts, we will look at the data in their totality and make a decision whether there is.
The sufficient signal in terms of efficacy and support for Tolerability to the then expand to 36 patients.
And if there is we'll go ahead and do that and by the end of the year. We should have the dataset that will tell us whether in Bunionectomy, which is a very painful surgery. This product performs the way we might hope it would.
Of course, if the data and when we look at it from the 4 cohorts does not support continued development and will make the the.
Hard decision.
And and consider the cessation of development, but we will be guided by the data in their totality.
I think my my view.
Is there should be a substantial step up in terms of overall probability of technical and technical success, assuming a positive bunion and that can be trial.
And just to follow up so would we have some of the data from part 2 by the end of this year or would that be more next year. We will have the we fully expect blending and it can be trials and general enroll rapidly and we have guided and continue to guide to the expectation that we will have the full.
Data set by the end of the year.
Got it that's really helpful. Thank you.
Thank you Ben.
And thank you and.
Our next question comes from Frank <unk> from Oppenheimer. Your line is now open.
Yeah.
Hi, guys. This is Daniel on behalf of our factory floor.
Thank you for taking the question 2 questions 1 as any developments on hyaluronic.
Hyaluronic acid products getting reimbursement pressure.
And the second question can you remind us once again of the convertible note when it's due and the terms of their thank you.
So I can take the I can take the first 1 and hand, the second 1 for Fred and.
And you may be aware of maybe the impetus for the question that the proposed rule CMS proposed rules came out.
In July and there was a piece of that proposal that called for of Medicare for all products all drugs Reimbursable under Medicare part D.
To begin reporting of S. T a.
And he changed the interpretation of that.
Of that proposed rule is at Ata's would be included in that and the event that they were included and that and all of the ache anything you just start reporting their asps and it would and I think definitely it will result in a change in reimbursement for the H 8 and perhaps the subsequent change and.
Their pricing structure and strategy.
Thanks.
Yes, that's right.
Convertible note is just over $200 million and it's due on may 1st 2024.
Thank you thanks for taking the questions.
And thank you.
And I am showing no further questions I would now like to turn the call back to Michael Clayman for closing remarks.
Yeah.
Thanks, very much and thanks for all of your time and attention. This afternoon.
Citing inflection point for the company in terms of our ability to extend runway to 2023 and a non dilutive way continued progress and the commercialization of the <unk> and knocking on the door of defining data for our 2 very exciting pipeline assets, So simply say stay tuned.
And we will look forward to communicating with you and the future as more information becomes available take care.
This concludes today's conference call and thank you for participating you may now disconnect.
Yeah.
Yeah.
And.
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