Q2 2022 Aerie Pharmaceuticals Inc Earnings Call

Good afternoon. Thank you for standing by and welcome to the Aerie Pharmaceuticals second quarter 2022 earnings Conference call.

At this time all participants are in a listen only mode.

Later, we will conduct a question and answer session and instructions will follow at that time.

Today's conference will be recorded.

It is now my pleasure to turn the floor over to Hans victim of lifestyle partners areas.

<unk> Investor Relations firm. Please go ahead.

Okay.

Thank you operator, good afternoon, and thank you for joining us with US today are Raj Kannan, Chief Executive Officer, Peter Lang, Chief Financial Officer, Gary Sternberg, Chief Medical Officer.

Today's call is also being webcast live on our website investors don't hurry pharma dot com and it will be available for replay as indicated in our press release now for forward looking statements and non-GAAP financial measures.

On this call we will make certain forward looking statements, including statements forecasts and observations regarding our future financial and operating performance, including our observations regarding ongoing operating expenses.

These statements will include observations associated with our commercialization of Rockwood Tannen Rhopressa in the United States and our collaborations in Europe , Japan and other regions of the world.

It will also include plans and expectations regarding the success timing and cost of our clinical trials, including the status and expected enrollment in such trials. Additionally.

Additionally, we will discuss progress regarding maintaining requesting or obtaining approvals from regulatory agencies of our products and product candidates along with the associated business strategies regarding these products and product candidates.

Finally, we will address our financial liquidity and other statements related to future events, including our financial outlook for 2022 and beyond.

Yes.

These statements are based on the beliefs and expectations of management as of today.

Our actual results may differ materially from our expectations.

Passengers should carefully read the risks and uncertainties described in today's press release as well as the risk factors, including our filings with the SEC.

We assume no obligation to revise or update forward looking statements, whether as the result of new information future events or otherwise.

Note that we will file our Form 10-Q tomorrow.

In addition, during this call we will be discussing certain adjusted or non-GAAP financial measures for additional disclosures relating to these non-GAAP financial measures, including a reconciliation to the comparable GAAP measures. Please see today's press release, which is posted on the Investor Relations section of our website.

With that I will now turn the call over to Raj Kannan CEO of Aerie Pharmaceuticals.

Thank you and good afternoon, everyone.

I am pleased to share with you why I'm, so proud of <unk> performance this quarter.

During the call.

We'll speak about the excellent progress across our three strategic pillars of growth and explain why we remain confident about <unk> continued growth through the rest of 2022 and beyond.

I'll start by providing you with a high level update on our strong second quarter commercial performance.

Our outlook for 2022.

And an overview of our excellent progress to date.

Then I'll ask Gary to provide you with an update on our pipeline, especially the exciting prospects with <unk> <unk> two in the dry eye space.

And finally, Peter will review the second quarter 2022 financials with you before I close with a few remarks.

We made significant progress across several key areas that are expected to drive sustainable growth for 2022 and beyond.

We continued to execute well on our three strategic pillars.

In building early version two point, though.

We delivered strong year over year revenue growth in line with our expectations for our first in class glaucoma franchise comprised of our novel products <unk> and Rhopressa.

We received early positive feedback from target prescribers on our refreshed branding strategy for Rockwood payment Rhopressa we.

We initiated two of the phase III Registrational efficacy studies for our lead product candidate <unk> for dry eye disease, and we continue to identify operational efficiencies and reduced net cash burn.

We believe these achievements taken together have set area for success.

During my first Investor call back in February of this year.

Outlined what we see as the three strategic pillars for long term success.

One driving sustainable growth of the commercial business.

Number two making smart choices with our capital and advancing our pipeline and number three reducing our annual cash burn rate to maintain a solid financial position.

Let me first address strategic pillars number two and three before I provide you with more detail on how we plan to drive sustainable growth in our commercial business.

On strategic pillar number two we've taken a deliberate and thoughtful approach to investing in our pipeline we.

We prioritize three programs.

Based on our assessment of the likelihood of Google and commercial success.

The potential value to drive value infection of the near to mid term and the speed to market.

First the phase III Registrational program for our lead product candidate <unk> 502 has strong momentum.

As you will hear today, we're increasingly excited about the prospects for <unk>.

And with the recent start of enrollment in the comment too in commentary efficacy studies, followed by the comment for safety study scheduled to enroll the first subject in the fourth quarter of 2022.

We believe that if approved <unk> could have a very competitive and compelling profile and the dry eye market.

Assuming clinical success.

We plan to file an NDA in 2024.

I wanted to note that area is planning to host a key opinion leader discussion of <unk> two in the fall.

We look forward to talking more about this event at the desk closer.

Our second late stage program <unk> hundred five with its targeting diabetic macular edema or <unk> is phase III ready today.

We believe it could replace currently available steroid treatment for <unk> with a one every six month dosing interval.

We continue to evaluate efficient options for phase II development of <unk> hundred five and partnering discussions are underway.

Our third program <unk>.

<unk> four has the potential to be a best in class product candidate for wet age related macular degeneration or wet AMD.

It is on track for an IND submission in the fourth quarter with the potential of a 12 month dosing interval and based on the combination of Ares print delivery platform and one of the most potent and well characterized tyrosine kinase inhibitors exceeding them.

On strategic pillar number three maintaining a strong financial position.

One of my ongoing priorities is to continue to drive greater operating efficiencies to preserve cash and optimized capital allocation decisions.

We've made substantial progress and expense rationalization, while continuing to grow revenue and advance our pipeline.

We ended the quarter with cash cash equivalents and investments of $184 4 million.

Net cash used in operating activities was $13 2 million and total change in cash cash equivalents and investments or total net cash used in this quarter was $14 9 million.

We continue to proactively analyze our capital structure to optimize our cost of capital and provides the financial flexibility to execute on our strategic plan.

Looking ahead, we expect net cash used for the rest of 2022 to be less than $20 million per quarter on average.

Our goal is to continue to drive growth in our glaucoma franchise improve our operating efficiencies and turn cash flow breakeven during 2024.

Now I would like to provide you with an overview of strategic pillar number one.

And tell you why we remain confident in the continued and sustainable future growth of our commercial franchise.

I am pleased to report that in the second quarter of 2022 rocking tenant brokers, our revenues grew by 23% over the second quarter of 2021.

Driven mainly by strong growth in total prescriptions of 15, 6%, which is well above the glaucoma market growth of two 7% during the same period.

In addition, as of June 2022, we continue to gain share and our franchise market share has increased to two 3%.

These results are in line with our expectations.

<unk> continued to bode well for the franchise growth in 2022 and beyond.

We expect continued strong growth.

In the future primarily driven by two key factors.

Number one you will recall that we introduced at a fresh brand strategy for our commercial glaucoma franchise in February 2022, with a focus on the lower is better theme or.

Our market research indicate that our strategy is positively resonating with target prescribers.

<unk> our goal is to move the drug earlier in the adoption continuum.

Our lead detail is now rocket hand, where we highlight the highly effective lowering of intraocular pressure or IOP.

And that early adoption of Rockwood hand may offer the lowest risk of vision loss in patients with glaucoma.

Our team message of prescribers is why not start with the most powerful efficacy right from the start start with Roxanne.

Turning to Rhopressa that drug continues to be well positioned because of its novel mechanism of action and a powerful and consistent lowering of IOP, especially in patients who are inappropriate for prostaglandin analogs.

In addition, physicians who are reticent to prescribed combination products see rhopressa as one of the most effective add ons at almost any stage of the treatment paradigm.

Given the encouraging feedback our customer facing team has received from target prescribers of rocket tenant drove reserve, we believe that the differentiated efficacy and favorable safety profile of these products provide physicians with a clear and compelling reason to prescribe them.

Overall, we feel confident that this revised brand strategy rollout could be the cornerstone to our commercial growth going forward.

Number two.

Our broad formulary coverage, especially in the Medicare book of business Paves, the way for increased pull through opportunities to drive greater adoption for our brands.

With a targeted approach on the largest part D and commercial payer opportunities are.

Our shares for both <unk> and brokers are continuing to grow month over month, driving overall brand share and increased confidence with the providers.

In summary, we're pleased with our second quarter commercial glaucoma franchise growth.

The updated brand strategy with greater clarity on positioning and refreshed messaging and increased pull through opportunities on our broad formulary coverage could position aerie to achieve a revenue growth target and importantly could potentially fund our journey to a bright future.

I also want to highlight our significant efforts to manage the business efficiently with a focus on controlling costs at all levels.

We implemented a reinvigorated capital stewardship philosophy across the company.

In the second quarter financial results reflect these continued efforts.

Before I move on I want to recognize the performance dedication and the commitment of the entire aerie team on a strong quarter and setting the company up for success.

Let me now turn the call over to Gary Our Chief Medical Officer to continue building on the reasons for our confidence and excitement about the future of our ARY Gary.

Thanks Raj.

I'm going to review the Registrational Phase III program for <unk> 501, too.

And then briefly provide updates on the other product candidates in our pipeline.

<unk>, our medical Affairs program and ongoing global studies.

Starting with our <unk> 501, two or 512 and three.

Being developed as a differentiated novel first in class product candidate for the treatment of the signs and symptoms of dry eye disease.

While there are a number of prescription and over the counter or OTC products on the market for the <unk>.

We believe there remains a significant unmet need for new therapies that can provide rapid onset of efficacy convenient dosing and importantly for therapies that can demonstrate consistent improvement across a range of sign and symptoms and quality of life endpoints.

As you know 501 towards the trip I made agonist, which acts as a called thermo receptor modulator to stimulate the cold sensing receptors found on the nerve endings that integrate the cornea and islands.

By stimulating these receptors 512 leads to natural tear production and a cooling sensation across the surface of the eye that may result in a reduction in dry eye syndrome.

I am pleased to report that the phase III <unk> Registrational program is well underway on our strong momentum.

A comment too uncommon III Registrational studies are both currently enrolling subjects followed by the comment for safety study in the fourth quarter of this year.

<unk> momentum in the phase III common program was driven by our effective collaboration common clinical investigators and the clinical data from the <unk> One study humira.

You may recall that the previously reported results of the Comet. One study showed statistically significant dose dependent improvements are multiple validated sign symptom and quality of life endpoints across multiple time points that are important that informed our selection of the proper dose primary and secondary endpoints and includes.

<unk> exclusion criteria for the phase III program with.

We recently released the results of a new phase one study that was conducted to confirm the primary endpoint for the <unk> phase III Registrational program.

These data reinforce our confidence in the primary endpoint that we selected for the phase III Registrational program. The Anesthetized Schirmer staff. The study was designed to optimize the anesthetized chairman's test as a measure of tear production in people with CEB.

It was conducted in 40 participants at a single center in the U S. I am pleased to report that the study replicated the statistically significant results of the anesthetized chairman steps from the <unk>. One study with respect to both the percent of responders, who produce at least 10 millimeters of increase wedding and by the change.

<unk> care production from baseline.

While also confirm that anesthesia interferes with the mechanism of action of <unk> <unk> two in the Schirmer test you can find the data from this study in our corporate slide deck, which is accessible from the company website and available on the company's Edgar Page. This result gave us additional confidence in the selection of the unexercised.

Schirmer test as the primary endpoint for our phase III efficacy studies and is why we remain confident in the likelihood of a positive trial outcome and a potential approval.

Wrapping up on the comments phase III program. The efficacy studies comments too uncommon III are identical each one will be a multicenter vehicle controlled double masked randomized study to evaluate a single concentration Ah <unk> 512 at 0.00% to 3% compared to the 500.

Two vehicle.

Administered twice daily for 90 days each.

Each study is expected to enroll about 460 <unk> at approximately 20 sites in the United States.

As I indicated the primary measure of efficacy studies will be assessed by the anesthetized Schirmer test at day, 14, which was physically significant in the phase II <unk> Comet, one study and the phase one study we just discussed the.

The key secondary outcome measure will be the symptom assessment in dry eye or Sandy symptom questionnaire score at day 28, which was also statistically significant and the comet one study.

In addition, numerous other signs and symptoms and quality of life assessments will be performed throughout the 90 day study period.

We expect to announce topline results from both efficacy studies in the second half of 2023.

Now I would like to change gears I'd mentioned, two other exciting pipeline programs.

$11 five for diabetic macular edema, or <unk> and <unk> for wet age related macular degeneration or wet AMD.

Start with <unk> 11 O. Five this is the first product candidate to use areas print delivery platform and the only buyer <unk> dexamethasone retinal implant to demonstrate six months of efficacy in treating macular edema.

Differentiated features Couldnt April reduced injection frequency and have the potential to position <unk> 11 O five I'd say best in class product candidate when using steroids to treat macular edema.

Continuing to evaluate options for phase III development of <unk> hundred five and partnering discussions are underway.

Second <unk> four is a pan VEGF receptor inhibitor intended to block all veg F receptor isoforms for the treatment of wet AMD <unk> also uses Ares print platform and its targeted to achieve an injection dosing frequency of up to once every 12 months, which would differentiate <unk>.

<unk> four from other programs in this space are on track to file an IND for a <unk> four by the end of the year.

As you know there are multiple additional studies underway with our glaucoma products, including the phase for a multi center open label Rockwood and evaluation are more study with Rockwood pad and a phase III trial being conducted in Japan by sent them for Rhopressa.

Expect results from both studies to be reported in 2023, I would now like to turn the call over to Peter.

Thanks, Gary.

I will focus my comments on our financial results for the second quarter of this year and no comparisons to the second quarter of 2021.

All of these numbers that I will review in this discussion will be approximate for easy sharing during our call.

For additional information regarding our second quarter results and prior period comparisons. Please refer to today's press release, and our Form 10-Q, which we will file tomorrow.

Starting with our glaucoma franchise combined <unk> and Rhopressa net revenues in the second quarter of 2022 totaled $33 3 million, a 23% increase over the second quarter of 2021.

Total cost of expenses include cost of goods sold of $3 7 million selling general and administrative expenses of $28 1 million and research and development expenses of $19 6 million.

Our cost of goods sold or Cogs decreased by $2 4 million compared to the prior year period.

Gross margins improved to 89% from 77% in the prior year period, mainly driven by higher utilization based on increased commercial production in the second quarter of 2022.

We expect cost of goods to increase for the remainder of 2022, given that a significant portion of our 2022 commercial production with managed factored during this quarter due to timing of planned production runs.

You will notice that some of this production was capitalized into inventory lowering our current Cogs.

Selling general and administrative or SG&A expenses decreased by $6 4 million or 19% compared to the prior year period.

This decrease is primarily due to lower stock based compensation as well as lower sales and marketing expenses.

For the rest of 2022, we expect SG&A to be similar to the second quarter levels and below the comparable periods for 2021.

Research and development or R&D expenses increased by $1 6 million or 9% compared to the prior year period and reflect continued investment in our clinical programs, including the initiation of two phase III efficacy studies for <unk> two.

We expect an increase in R&D costs through the end of the year as enrollment in the comments to and comment III studies ramp up and we initiate the comment for safety study in the fourth quarter.

The net loss for the second quarter of 2022, with $19 4 million or <unk> 41 per diluted share.

The total stock based compensation expense was $4 million of which $1 million was included in cost of goods sold $2 6 million in SG&A and $1 3 million in R&D.

After adding back stock competition expense, our total operating expenses for the second quarter were $43 8 million.

Excluding stock based compensation expense, our total adjusted net loss was $15 4 million or 32 cents per diluted share.

Over the quarter weighted average shares outstanding were $47 6 million.

As of June 32022, our shares outstanding were $48 7 million.

For the second quarter of 2022, our net cash used in operating activities was $13 2 million.

Total change in cash cash equivalents and investment or total net cash used was $14 9 million.

As reported earlier in today's call as of June 32022, we had $184 4 million in cash cash equivalents and investments.

As noted by Raj area is focused on driving operational efficiencies and implementing actions to use our cash more efficiently.

As part of the discussion on our cash balance I want to mention that we are proactively exploring alternatives to address the outstanding convertible notes to optimize our cost of capital, especially given the macro environment and capital markets challenges facing many biopharma companies.

In closing, we believe we are well positioned financially to fund our current business plan.

Our financial guidance for the remainder of 2022 and beyond as outlined by Ross is number one with our glaucoma franchise. We are reiterating our guidance for 2022 net product revenues of between $130 million and $140 million.

Number two.

For our net cash used we are updating our guidance to be less than $20 million per quarter on average for the balance of the calendar year.

Number three we expect to achieve cash flow breakeven during 2024.

All of our guidance assumes no change in our current capital structure.

Now I would like to turn the call back to Raj for a few closing remarks before Q&A.

Thank you Peter to conclude I believe areas executing well across our three strategic growth pillars to build out every version two point out looking.

Looking out to the rest of 2022 and beyond we expect to deliver continued revenue growth in our glaucoma franchise, driven by our refreshed branding strategy.

Continue enrollment in the comment to <unk> comment III efficacy studies and initiate enrollment in the comment Ford safety study for <unk> in the fourth quarter of this year.

Submit the IND filing for <unk> for <unk>.

And continue to drive operational efficiencies to strengthen our balance sheet reduce our net cash burn and become cash flow breakeven during 2024.

I remain confident in our ability to deliver on our plan and deliver meaningful value for our stakeholders.

I look forward to updating you on our progress along the way and thank you all for taking the time to join US today before I turn the call over to the operator for Q&A note that Casey Kopczynski, our cofounder head of research and external innovation and Michele Santana, our head of clinical development and operations will be joining us for the Q&A segment of.

Today's call.

I will now turn the call over to the operator for Q&A operator.

If you'd like to ask a question at this time. Please press the Star then one one on your telephone.

Thats Star one one to ask a question.

Please standby, while we compile the Q&A roster.

Our first question comes from the line of Louise Chen with Cantor. Your line is now open.

Hi, Good afternoon. This is carvey answer Luis from Cantor. Thank you for taking my questions.

Been a lot of developmental traction on the phase III program can you remind us of the market opportunity for a 155 dry eyes.

We have a second question, which is do you expect any macro headwinds our net revenues for the rest of the year. Thank you so much.

Hi.

This is raj and thanks for taking Luisa <unk> place.

Both are good questions. Let me address the first question first.

<unk> is the dry eye market as you know today the prescription market for dry eye is about $1 6 billion and if you include the artificial eyedrops.

That are used on and on and off basis, its roughly about $3 billion.

But also remember that the current products the dominant products Restasis and <unk> are.

Are not effective in a majority of patients so eight to nine patients drop out of therapy. So we believe this market is in.

Severe need for effective therapies that work across a number of patients that this market could be much larger than the $3 billion that we see today.

On the macro trends.

In terms of the revenue growth.

The one thing that we focus on is obviously any change in the access to physicians.

One and number two.

Constant back and forth that we have with payers.

In terms of of how the overall industry is reacting to some of the legislation that is expected to come out of Congress. So I think beyond those two macro.

I think we remain still confident that we.

We will.

<unk> the guidance that we provided to the street for 2020.

Hope that answers your question.

Yes that was super helpful. Thank you so much again congrats on the quarter.

Our next question comes from the line of Serge Belanger with Needham. Your line is now open.

Hi, good afternoon.

A couple of questions for me first can you Ross can you talk about if there was any movement on the net price per Rx during the second quarter.

And then secondly, maybe just give us.

An update on the refreshed brand strategy in terms of the feedback you've gotten and whether youre starting to see some <unk>.

Usage changes between local Shannon and Rhopressa. Thank you.

Hi, This is raj thanks for those questions.

As I previously mentioned on the net price.

I had stopped providing guidance on the net price we had said at the very end at the very first call in February that we averaged about $90 per bottle for 2021.

I'd say that our goal is to continue to improve that net price per bottle, but did not provide any any guidance or a guarantee as if this is a constant battle back and forth between us and the payers.

We'll say that.

It goes below $90 I will come to the street.

And be transparent about that but to answer your question at a more high level, but that specifically answer your question I don't think we've gone below.

I'm pleased with where we are with the net price per bottle in terms of its improvement year to date.

In terms of the update on the rocket Pan strategy.

We are seeing an uptick in Rockford 10 prescriptions.

From our weekly data points in both <unk> and Rx and I think as I mentioned in my prepared remarks, it's largely due to our clear and compelling strategy to prescribed block of rock mechanics first line.

As you recall efficacy is a key driver of brand choice in glaucoma, we felt positioning rockwood Pam as the most efficacious agent and lowering IOP that resonates really well with prescribers.

And.

It's the same consistent feedback that we have from our field based teams as well.

So hope that answers your questions.

Yes.

One more and I don't know if you covered this in your prepared remarks, but did you give any update on the ongoing more study and when we could see results from that.

Update on the more study.

Oh.

Our studies enrolling really well and we expect to have our top line results from the more steady in the second.

In the middle of 2023.

Got it thank you.

Yes.

Our next yes.

Our next question comes from the line of Annabel <unk> with Stifel. Your line is now open.

Hi, Thanks for taking my question.

No.

A couple so the first one will know Apple so the first I wanted to talk about it.

Yes.

The Comet studies and I just wanted to go back carrier pivotal strategy with.

The Schirmer score as the primary Anderson describes the secondary I know that that's been precedent.

Sure.

Yes.

Looking at hitting the schirmer score as the primary.

And having the sandy the second secondary.

Still getting an approval.

But is there any kind of questions.

The secondary the Sandy score you would have to retailer trial or once you get a narrower label.

What would you.

So what are the scenarios, we should think about.

With that.

The primary and the secondary and whether you can hit that.

And I know there is confidence that you can hit that because of his comment one, but just trying to work out the scenarios here.

Yes, hi, Annabel thanks for those thanks for that question.

As you know we remain very confident in our phase III pivotal trial.

Like you said based on our phase <unk>.

Results not only insignificant tear production that we saw in the anesthetized Schirmer score, but also robust symptom relief.

Not just one but three different questions right Sandy ocular discomfort in eye dryness.

As you know we also completed an interim step of conducting a phase one <unk> study between the phase <unk> and the start of the phase III just to prove the hypothesis that anesthetized the eye interferes with the mechanism of action of <unk>, and we were able to again replicate the robust magnitude of efficacy we saw with the Uninvested.

<unk> Schirmer test in phase II.

And do now specifically answer your question, we have aligned with the FDA in choosing the anesthetized Schirmer score as our primary endpoint for marketing approval.

So we Derisk. This study based on the high level of confidence that we had on that particular one so.

So if we missed the secondary endpoint I think.

The FDA will look at the totality of the data, it's not a black and white, we have to replicate study is ongoing so we need to look at the two studies, what the directional trends were and how the phase II data plays into the Fda's regulatory review. So I think we have a high level of confidence that our product profile will.

And our best in class ASM in the dry eye space.

But I'll also let Gary.

Michelle.

Way and more.

I have not answered that question fully Gary Michel.

Yes, just to add to that I think it's important rises Scott.

Spot on but I think there are really two pathways that are put in front of us by choosing the primary endpoint and the primary is and as you said the Anaesthetize humira.

If we were not to hit I think the heart of your question. The FDA has agreed to the label of an increase in <unk> production.

But then to rise as claims neighborhood care further look at the totality of the data and potentially consider adding sometimes depending on the trends across all the studies, but at minimum just hitting the primary guys provide a path forward to an approval.

Then obviously you add.

Significant improvement.

<unk> and Sandy and then a full label has been a great care.

Yes. This is Gary I would just add that if you look at share via their labels assigned with symptoms yet they only have data on.

The schirmer testing so again just to reiterate what Michelle said, if we just hit the primary endpoint.

At least get a label for an increased tariff protection, but potentially on the totality of the data possible you might be able to get signs and symptoms as well. However, our goal is to hit the signs and symptoms directly.

Okay got it.

Okay, Great. That's helpful. And then on the second question I have the more study.

You talked about enrollment is going well and you might see the data.

But.

In terms of what impact that could have on rocket.

Cake is there any sense.

The most study Thats a similar study that was conducted with Rhopressa, how much that resonated with physicians and what and how much it drove.

Rhopressa uptake.

During that time that you are willing to invest more study.

I guess the same create the same dynamic is there any kind of <unk>.

Number or qualitative idea of how much these studies help in driving penetration.

I know, we're not going to some question rod, but I just wanted to understand that there is something that continues to support it going forward.

Yes, So let me take a first stab and I'll, let Michelle.

Add any commentary to the more study.

I think Anabelle. These studies are done to continue to generate real world data and put the product into the hands of physicians.

The community level, so that they can see.

What we're talking about in terms of how rocket Tam as first line represent as an add on generally tends to align with the key messaging that we have and I think that real world generation of data is not only useful to prescribers, but it is also useful to payers when we generate these data and it creates a certain level of enthusiasm.

Some for the field when we have new data that we presented to prescribers. So I can connect the dots and exactly tell you what that inflection point will be in terms of the share gain but I do know that the most study resonated really well with prescribers and the fact that efficacy continues to be the key driver of choice in this particular market place to stay.

That we are two to four points better than Latanoprost, which is primarily again chosen because of its efficacy I think the continued data generation will only help us solidify Rockford Tam as first line or its first switch in the glaucoma marketplace.

Michelle from a medical affairs perspective.

Miss anything to answer both questions.

I think that was very well articulated we were very impressed with the uptick that we got with with not just with regard to just the residents amongst our prescribers as Raj mentioned and that really was part of the Q O Q.

Get more off the ground and I think now, especially as Raj introduced during his remarks with the increased focus on really putting the potency.

Rocco.

And if our Frank the study is going to certainly augment that message.

Okay perfect. Thank you.

Our next question comes from the line of Stacy <unk> with Cowen. Your line is now open.

Thanks, so much for taking our questions and congratulations on the quarter. So we havent done.

And just a.

Quick follow up on kind of the Brooklyn Rhopressa franchise.

As we think about your positioning for rattler can.

Specifically.

What are your expectations in terms of the future growth.

If you think about first the contributions for 2022.

Yes.

How do you think how do you think it might play out in the next few years. So to your first question and then our second question is for.

14, three four can you provide your early thoughts regarding the potential.

Clinical stage early stage design.

It looks like where I was trying to study 12 months of duration. So maybe help compare and contrast, the different development pathways taken so far for the other.

So for instance, there can kind of different entry criteria trial design, Matthew Kristina So any of the understandably very early thoughts would be appreciated. Thank you.

Thank you Stacey.

So let me take the first question first and the second and then ill.

Have my colleagues weigh in but the additional commentary where needed.

So on the rocket tenant Rhopressa franchise, I think as you know the better we are.

In terms of positioning Rockford hand, as first line or first switch that sandbox is much bigger.

<unk> four as an opportunity and I think as I said in my prepared remarks, we're already seeing encouraging trends in terms of the growth rate for <unk> versus rhopressa. So I think the better we skew the product mix towards Karaklis hands not only it is the right thing to say medically speaking, but also from an economics perspective it actually.

<unk> is better for the franchise overall, because <unk> has a better.

This price at a net price versus Rhopressa. So that's one I think the second on the franchise perspective in terms of growth. There is crystal clarity on the positioning for both products right. I think we didn't have that kind of clarity prior to that prior to this and I think the feedback from the field based teams and their prescribers has been very encouraging so rockford.

As you know has a very unique MLA that is not replicated by any other brand in the glaucoma space and importantly, rhopressa has with that unique MLA allows for consistent and powerful IOP lowering regardless of baseline therapy or <unk>.

Regardless of the baseline pressure.

And so we're positioning rhopressa in particular for patients who are not appropriate for our PGA therapy prostaglandin. So here. This is quite a large market it's up to about 20% from what we understand from our own research and that allows us to position brokers, especially in that marketplace.

As to be adopted earlier and in physicians, who tend to be reticent and we have a history of about 40 years in the market base, we know, which physicians are reticent in using combination therapies and repositioned rhopressa as the best AD on agent, but drives the earlier adoption. So.

As I said before this is a strategy that we adopted we took a bet on and I think the early results are encouraging and if this trend continues I think the potential commercial opportunity could be much more attractive than what it was before.

So that's essentially.

Sort of my comments on the Rhopressa and rock Lappin question that you asked in terms of the $14 three for obviously, we're very excited about the potential prospects of $40 three four as a best in class agent for wet AMD.

In terms of the dosing interval.

We do plan to file an IND in the fourth quarter of this year.

Maybe in the second quarter late second quarter, we hope to get into the clinic at this time.

The details of the study design, we haven't finalized that internally, but we anticipate using an adaptive phase <unk> study design that will allow us to move quickly from dose escalation.

Something that you mentioned is a head to head comparison, a $40 three for long term efficacy versus a chosen marketed.

Anti VEGF product.

I'll, let Casey Gary weigh in more on $14 84.

I've missed anything in particular.

This is Gary I'll, just reiterate that our preclinical studies support a 12 month duration of drug release.

And we have correctly extrapolated animal data to human data in the past with our <unk> program. So we feel comfortable that our product is a 12 month duration.

I'll just pass it over to KC, if he wants to add to that.

It does.

And it really is the summary point here is the data look very strong pre clinically.

And.

This looks to be the best.

Opportunity to have a once per year injection for anti VEGF.

Relative to some of the other options that are in development.

Thank you very much.

Our next question comes from Jason <unk> with Bank of America. Your line is now open.

Hi, This is Perry on the line for Jason Thanks for taking our question.

First question on the phase III dry eye program.

Can you speak to the attractiveness of the triad market now.

Now that safe generics have entered.

The market as well as.

The fact that you have <unk> enabled to grow despite having a well resource marketer.

And also can you speak to the extent to which the category as being.

More aggressively managed by payers and then second on the clinical side.

Sure.

What are some of the Bogies you need to hit in terms of efficacy to separate yourself from.

Involving dry eye category.

<unk>.

Yeah.

Hi, Terry.

Thanks for those questions. So let me start by saying that the dry eye market is a very underserved and a large marketplace.

Number one.

I think if you look at the unmet needs here.

For Restasis and <unk>.

Roughly about one or two patients stay on therapy. So we do know a large number of patients drop off therapy on both these products because theyre not effective across.

A wide spectrum of patients.

Number two the onset of efficacy for Restasis for example in tier production takes approximately about six months.

To manifest and this is a highly symptomatic disease and I doubt that patients would wait six months to stay on therapy.

<unk> is roughly about three months. So there is a clear need for rapid onset of efficacy and if you look at <unk> phase II results.

Not only are reactive right after.

Day, one after dosing, but we show clear statistical significance and tear production in on day 14. So the rapid onset of efficacy is a clear unmet need and I don't think restasis and <unk> are going to be able to compete with products that provide that so that's one two.

If you look at the magnitude of efficacy and it's in our investor deck, we replicated in a small phase <unk> study with 40 patients.

Our effect on tier production and you can clearly see the delta is roughly in the <unk>.

<unk>.

Compared to take Restasis. The Delta was roughly about 10. This was the first product that was in the marketplace. So this has to be meaningful in terms of the magnitude of efficacy in terms of tear production that we believe is a totally new generation of products that are coming into the marketplace to meet the unmet demand and third I think in the phase II.

B results, we were quite pleased with how well the.

Effect on sign with just pure production.

The multiple symptoms that we measured and the correlation to improvement in quality of life measures and the improvement over time correlated so well and consistently pointed in one direction right. So I think again when I say that this product has the potential to be a best in class. It really does address b.

Three unmet needs that I, just articulated in the dry eye space.

So I hope that answers your question in terms of why.

Continue to believe there are statements either are what we would call old generation products and hopefully <unk> could position itself as a new generation, but importantly, as a best in class agent.

<unk>.

In terms of.

The other products in clinical development like you said I think there is a reason why this market is so attractive theres about 14 companies. According to our own competitive intelligence that are either conducting phase two or phase III studies.

And I believe five companies have phase III studies that are actively recruiting that is from Quintiles dot Gov. As we look at it. So again when we look at our product profile compared to these products.

Our MAA is and the phase III results the robust results by the way. This is not a small phase II. If you recall. This was 369 patients that gave us a lot of confidence in the statistical significance and in our ability to replicate these endpoints.

Terry I hope that addresses your question as to why we continue to be bullish on our <unk> and why we specifically allocated capital.

Precious capital within our company to invest in Taiwan to and partner 1100 slides I hope that answers your question.

Yes.

Yes that answers.

A question I guess, the other was on I.

I guess, the extent to which.

You view the category as being.

More aggressively managed.

By Payors and then.

Any any specific bogey as you see.

Within space on some of the efficacy or safety endpoints for <unk>.

Phase III development those are the other two questions to that.

Yes, So let me take the.

Sort of the pricing or the payer question I think we are proactively given sort of experience with rhopressa and <unk> and the lessons that we've learned right in terms of bringing novel products to market I think there is.

Large institutional knowledge within the company on how to do this right with a dry eye product when we go to market.

Here I think we have a timeline in terms of generating meaningful data for payers and to work with payers proactively before we come to the market rate as we go through the approval process. So I don't I cant give you. The details right now of those studies that were thinking about but we do have.

A few ideas.

On the table that we plan to kick off as soon as we see the first top line results and we know this is a go.

In terms of going to market, we will kick those off and that will help.

In terms of partnering with payers and not making it into an adversarial situation, where it's them versus us.

That's the best I could give you as a response today.

And again, given our product profile and given sort of the patients will prefer this product given the onset of efficacy and the magnitude.

And the magnitude of effect that we expect to see I think this will be easier conversation with payers in terms of how we positioned 15 512 versus.

How we did in the past with our glaucoma products.

Michelle or Gary again to weigh in on anything that basically on the efficacy and safety side.

Yes. So this is going to just ask a clarification.

Verification on the chairman Bill Jacobs being a lifelong golfer I want to make sure.

He is bad.

What exactly your question are you seeing things that we can avoid or things that we really think are going to differentiate us.

Yes, I guess, just thinking about the primary endpoint for <unk>.

On the comment to trial are.

Are there any benchmarks in terms of competing products where.

They are using a similar efficacy endpoint.

Where you'd want to beat that.

Or any other way that we can kind of look at.

The ongoing readouts.

We can set a benchmark for success or.

I guess, how you think about.

The readouts in those terms.

Yes, great question.

It's very hard to compare across the programs are anchored different population despite differences in methodologies et cetera, but with that said I'd.

When you look at to your production and there are a number of products on the market that would predict cares and gradually coming down a couple I think very important bank. The time, you actually see effect of what's happening immediately earning immediately or is it happening six months down the road certainly our second foreign products.

From a duration perspective.

Important comparative from a magnitude perspective again, Brian commented on that robustness.

I would say that <unk> would be in that ballpark you start looking at over 50% of patients responding.

The caregivers are looking for our ACP as one and now they have a prescribed something more than 4% of the population are accident and a likely respond for license definitely looking at number.

40% to 50% of the population start responding as we have set up our primary endpoint in phase III that will be an important comparator.

And then there is no question from a symptom perspective there.

No.

<unk> standard or validated measure to say what is clinically significant when you are looking at all these different scales.

But again, there is differentiation vehicle as well as at <unk>.

To feeling better.

<unk> driven disease.

The faster you can demonstrate statistical significance or even separation from vehicles I think that's going to be a very important hallmark.

<unk> utility pipeline here.

Got it. Thank you that's very helpful.

Our next question comes from the line of <unk> <unk> with Citi. Your line is now open.

Hi, This is carly on for Yigal. Thanks for taking our questions. We have two the first is if you can talk about the latest feedback you're hearing on reimbursements, especially as you're trying to position Rockwell Tan as more of a first line or second line agent.

Having any issues getting work with Ken covered when it's used ahead of.

Some of the generic options and then the second is if you can maybe just give an update on how partnership discussions are progressing for <unk> 11 O five that would be great. Thank you.

Hi, Carly this is Raj.

So let me answer the first question in terms of our positioning for Rockford tenets first line. So most patients as you know represent <unk> are not new to glaucoma and have been on other therapies. So we hope to satisfy most of the step edit criteria are proud of our prior authorization.

That is in place to obtain reimbursement and coverage, but importantly, Medicare which represents the bulk of our business, which is 60% of our business almost half of these patients have no step edit and have the lowest branded copay. So thats important to how we are very precise in terms of targeting those offices.

And these patients.

In terms of making sure that rocket engine continued to be first line.

And as you know on the Medicare.

Part B.

We are roughly close to about 80% formulary coverage for <unk> and <unk>.

Commercial tried it.

Hi, <unk>.

So we think we have optimal formulary coverage for <unk> to be able to continue on that strategy of positioning Rockford in that first line.

In terms of the second question on partnering for <unk> hundred five as I said in my prepared remarks. Obviously this is a product that has ah.

Clear more of.

Clear path to market from a likelihood of approval because of the mitigation of the biological risk of the compound and it.

And as the first proof of principle for our print delivery platform in terms of showing.

A dosing interval of 136 months, but have the steroid dose. So those discussions are actively going on actively ongoing right now out there in the data room, but.

I will update the marketplace as soon as we feel that we've got the right partner that will put in the right developmental effort and maximize that potential of that product in the marketplace.

I hope that answers your question currently.

Yeah, that's great. Thanks, Scott.

Our next question comes from the line of Greg Fraser with Truest. Your line is now open.

Good afternoon, and thanks for taking the questions.

Ed you refreshed messaging continues to gain traction and rafa can share growth accelerate when do you think brought the team here could surpass that of Rhopressa.

Months away quarters, maybe next year, some time I'm curious, how you think about that.

Yes, so Greg.

Great question, obviously, we're pleased with the preliminary weekly that we see where rocket and continues to grow much faster than.

Than expected actually in the first line positioning.

By the way.

May not have mentioned this rate. This was this is a record quarter for us in terms of the revenues.

$33 $3 million represents the highest net revenue that we've ever recorded for a quarter and that again boost our level of confidence and saying not only are we on a good trajectory for sustainably growing our commercial franchise, but that being said I think the product mix is roughly getting closer to the $55 44.

And I think rocket and is growing at roughly 25%, whereas rhopressa is growing at about 10 or 11% quarter over quarter. So.

We do the math sometime early next year, the product mix will be more in favor of <unk> and as a result, the economics will be also.

Being much more favorable for aerie with rocket 10 being in the lead.

I hope that answers your question Greg.

Yes, very helpful. How much of a difference is there and the net price between the products.

Yes.

So we haven't given that out publicly but you can see the WAC freight and youll see the formulary coverage differences. So obviously from a net perspective.

Hi.

<unk> is in a better net so when you look at.

When you look at the Rhopressa just to give you some numbers that you could use for your modeling right for Rhopressa in the Medicare book of business, which is our largest it's close to 93% formulary coverage, whereas for rocket Pan.

It's 79% in the Medicare book of business right. So the net not only theres a whack is different between rocket depend on Rhopressa, but also the net is in favor from an economic and from an economics perspective same thing with commercial grade brokers.

Mid seventy's, so as <unk>, but importantly, the WAC price makes a big difference so.

This is a one time I feel that its a medically the right thing to do to position rock Lappin as first line because of its efficacy and because it has some.

Highest ability to reduce vision loss in patients with glaucoma, but it also aligns very well from a business perspective, because the economics favors roughly 10 more than brokers.

Great. That's very helpful. Thanks for taking the questions.

Thank you Greg.

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