Q2 2023 Cara Therapeutics Inc Earnings Call
Thank you for standing by and welcome to Cara Therapeutics second quarter 'twenty to 'twenty three earnings call.
At this time all participants are in a listen only mode.
After the speaker presentation, there will be a question and answer session.
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I'd now like to hand, the call over to Matt Murphy Investor Relations. Please go ahead.
Thank you operator and good afternoon.
After market close today <unk> issued a news release announcing the company's financial and operating results for the second quarter of 2023.
Copies of this news release and the associated SEC filings can be found in the investors section of our website at Www Dot Cara Therapeutics dotcom.
Before we begin let me remind you that during the course of this conference call, we will be making certain forward looking statements about Kara and our programs based on management's current plans and expectations.
These statements are being made under the private Securities Litigation Reform Act of 1995 and are subject to risks and uncertainties.
Actual results may differ materially due to various factors and care undertakes no obligation to update or revise these statements publicly as a result of new information or future results or developments investors should read the risk factors set forth in carriers 10-K for the year ended December 31 2022.
And any subsequent reports filed with the SEC, including its Form 10-Q for the quarter ended June 30th 2023.
With that said I'd like to turn the call over to Chris Posner Harris, Chief Executive Officer, Chris. Thanks.
Thanks, Matt Good afternoon, everyone and thank you for joining our call with me today are Ryan Maynard, our Chief Financial Officer, Dr. Joanna can solve as our Chief Medical Officer, and Scott to really and our general Counsel and head of government Affairs I'd like to start by giving a quick overview of what I'll address today.
First I will give an update on the core soup injection launch in the U S, including clinical level data to provide visibility into underlying demand trends across the different segments of the dialysis market.
I'll also briefly touch on the proposed calendar year 'twenty 'twenty four ESR D. P. P S rule, which CMS published in late June .
Next I will review the could prove you launch progress in countries around the World then I will discuss our wholly owned pipeline and the progress of our three late stage programs for oral debt fell at Caf one.
Finally, Ryan will provide a financial update after which we will open up the call to Q&A.
With that let me discuss the core Suva injection launch in the U S for the second quarter of 2023 net sales for Corso, but were $11 $4 million translating into $5 $4 million of profit recorded as revenue to Kara wholesaler shipments to dialysis clinics.
Totaled approximately 67000 vials, a 46% increase from the prior quarter.
67% of these vials were shipped to F. M C clinics with the remainder split between Davita and the other D O S.
This increase in vials shipments suggests a continued drawdown of inventory at FMC and an acceleration in demand across all D OS.
Ongoing anecdotal feedback on course, Suva from both providers and patients remains highly positive highlighting that course suba addresses a significant unmet need.
At FMC orders grew by more than 50% quarter to quarter, reaching 45000 vials by the end of the second quarter over 700 F. M C clinics or 27% had placed reorders that's up from 18% at the end of the first quarter.
More importantly, 1300 clinics or 50% had dosed at least one patient that's up from 42% at the end of the first quarter no.
This is a correction based on numbers provided to us by F. M. C. We reported on our first quarter call that 1500 clinics had dose at least one patient.
The growth in the number of FMC clinics, reordering as well as clinical dosing a patient suggest continued drawdown of inventory at the clinic level.
If this trend continues at the current rate, we believe that the majority of FMC clinics will have depleted their inventory and will be in reorder mode. This year.
At Davita, we're seeing continued steady growth in demand orders grew by 43% quarter to quarter to 11000 vials over 400 clinics or 15% had order of course, sue but at the end of the second quarter, that's up 11% at the end of the first quarter.
Reorder River rates remained very encouraging with 73% of clinics, placing repeat orders given the on demand approach at Davita clinics for ordinary course, Suva the growth in clinic orders represents a good proxy for the growth in patient demand.
And midsized independent D. O's course, Suva utilization continues its momentum.
<unk> grew by 28% quarter over quarter to 11000 vials at the end of the second quarter, 17% of clinics. In this market segment had placed orders that's up from 13% at the end of the first quarter.
In addition, 68% of these clinics placed repeat orders and that's up 66% at the end of the first quarter.
U S. R. C remains the largest buyer of course silver in the M D O and ideas segment.
73% of U S. R. C clinics had orders of course Super by the end of the second quarter and 80% of these clinics have placed repeat orders.
While of course, Suva continues to make meaningful progress in the U S. A majority of the market remains untapped and there is significant room for growth.
Our partner CSL before is fully committed to driving course hoover's uptake in this unique ecosystem with the goal of maximizing its commercial potential in the long term.
Now I will briefly touch on the ESR D. P. P. S proposed rule for calendar year 2024.
This rule once this final well determined the framework for core soup as reimbursement after its to dapper period.
In late June CMS proposed a new add on payment adjustment for certain new renal dialysis drugs after their to DAP at period ends.
The posted dapper payment adjustment applies to all dialysis treatments for a period of three years immediately following the exploration of the drugs to DAP up period.
The proposed methodology calculates the add on payment for each treatment based on the prevailing a S P and the drugs utilization during the most recent 12 month period.
CMS also proposed a risk sharing arrangement with ESR D facilities calculated at a 35% discount to the prevailing a S. P to account for any declines in other drug expenditures.
We are pleased that CMS propose additional funding that is not budget neutral for innovative to dapper designated drugs that fall into an existing functional category.
We are also glad that the new funding starts immediately after the exploration of the to dapper period. It gets adjusted annually by the market basket update however.
There are certain limitations to the proposed methodology, which we plan to pointedly addressed with CMS in the coming months.
Specifically the add on payment applies to all dialysis treatments and does not follow the patient.
In addition, a 35% discount to the prevailing asps does not take into account first in class drugs like course, Suva that don't have a therapeutic substitute.
Since the proposed post adapt a reimbursement methodology makes a drug's uptake during its the dapper period, a key factor in future reimbursement rate setting. We plan to also address the question around appropriate utilization data with CMS near term.
Specifically, we will be laying out a case for additional to that at the time.
We will Furthermore, pressed or changes to the proposed methodology to account for innovative first in class products that target a minority of ESR D patients.
We will continue to work closely with CMS and provide information to highlight the best solution for broad and equitable patient access to innovative drugs like course Suva in the final rule, which is expected later this year.
Next on the international front, the rollout of could prove you're in Europe is progressing well.
In the second quarter could prove you generated $1 2 million in net sales translating into $123000 of royalty revenue to us launches have begun and seven EU countries with more lined up in the coming months.
C. S. L V for continues to report positive feedback from patients and providers in line with the testimonials. We have received in the U S.
We are pleased with the recommendation by England's National Institute for Health and care excellence or nice four could peruvia for the treatment of moderate to severe chronic kidney disease associated pruritus and adult patients on hemodialysis.
In Japan, we continue to expect a regulatory decision in the second half of this year.
As a reminder, approval in Japan would trigger a $2 million milestone payment to Kara.
We are pleased with the progress around the world and believe the success of the ex U S launch to date underscores the significant unmet need for an effective anti periodic treatment for hemodialysis patients.
Last but not least let me touch on the development progress of our innovative wholly owned pipeline.
Enrollment in our phase III programs in pruritus associated with atopic dermatitis and advanced chronic kidney disease is progressing well, we anticipate the internal readout of part a of our kind one a D trial in the fourth quarter of this year with final top line results from this program in the first.
Half of 2025, we continue to expect top line results for our kick program and advanced chronic kidney disease in 2024.
Our phase II three courage trial and no tells you pair of static commenced in the first quarter 2023, and it's tracking to the internal readout of part a in the second half of 'twenty 'twenty four.
We expect top line results for the courage program in the first half of 2026.
We strongly believe that oral diphenyl, a kathleen is the centerpiece of our strategy of becoming the leader in the treatment of chronic pruritus and the key to unlocking the long term value of care.
And we remain committed to driving progress of our pipeline and building our unique nephrology and medical dermatology franchises with the world I felt it Kathryn.
To summarize we are pleased with the continued progress of the U S core Suva launch as evidenced by the acceleration file shipments and reorder rates across the dialysis landscape.
Following cms's proposal for a post adapt but add on payment we are engaging with CMS to discuss potential modifications to the proposed methodology as well as an extension of course supers to that at the time.
We hope to see meaningful changes reflected in the calendar year 2020 for final rule later this year.
Internationally, we continue to receive positive feedback from the rollout of could prove you and we are optimistic about the growth trajectory as more countries come online.
We also continue to execute on the most significant long term value driver of our company our differentiated innovative pipeline.
Our three late stage programs with oral day fell a caf one have potential for tremendous value creation and set us apart as a leader in chronic pruritus, we remain laser focused on advancing these programs in order to maximize the potential of that felt like caf one within our two exciting therapeutic.
The franchises.
I would now like to turn it over to Ryan for additional details on our second quarter financial results over to you Ryan. Thank you Chris.
Total revenue was $6 9 million for the three months ended June 32023, compared to $23 million for the same period in 2022.
Now revenue this quarter consisted of $5 4 million of collaborative revenue related to our profit from CSL V for US net sales of course Suva injection.
One 4 million of commercial supply revenue.
123000 of royalty revenue, representing our royalties from net sales of <unk> yet.
Now revenue in the same period last year included a $15 million milestone payment for the approval of could prove you by the European Commission.
As well as $8 million of collaborative revenue related to our profit from CSL before sales of course silver.
Cost of goods sold during the three months ended June 32023 was $1 4 million and relates to our commercial supply shipments of course Hoover injection to CSL before.
There was no cost of sales.
During the three months ended June 32022, as there was no commercial supply revenue from.
CSL before.
R&D expenses were $30 3 million for the three months ended June 30th 2023 compared to $19 nine in the same period of 2022. The increase in R&D expenses is primarily due to the increased clinical trial spend related to our three late stage clinical programs.
Partially offset by a decrease in stock based comp.
G&A expenses were relatively flat at seven 5 million for the three months ended June 32023, compared to seven six in the same period of 2022.
Cash cash equivalents and marketable securities at June 30th 2023, total of $101 7 million compared to $123 4 million at March 30, <unk> 2023.
The decrease of $21 7 million this quarter was primarily due to cash used in operating activities.
We expect that our current unrestricted cash cash equivalents and available for sale marketable securities are sufficient to fund our currently anticipated operating plan for at least the next 12 months.
This guidance assumes all the spend related to our three late stage clinical development programs.
And of course silver revenue profit share contribution.
We continue to work to extend our runway past the guidance by focusing on non dilutive funding sources.
Now back to you Chris.
Thanks, Ryan I want again to emphasize our confidence in the commercial potential of course, Suva, Peruvian Europe as well as the tremendous upside of our pipeline for all of their fellow Catherine we continue to believe that our long term strategy will make care are the leader in the treatment of chronic pruritus and will deliver.
Meaningful value to our shareholders.
With that Ryan, Joe Scott and I will be happy to take your questions. Operator, you can please open the line for Q&A.
Yeah.
As a reminder to ask a question you will need to press star one one on your telephone again Thats Star one one on your telephone to ask a question to remove yourself from the queue. You May Press Star one one again, please standby, while we compile the Q&A roster.
Our first question.
Comes from the line of Dennis thing of Jefferies.
Hi, good afternoon. Thanks for taking my questions. Congratulations on all the press on that.
On the progress in the second quarter.
Two questions for me maybe.
How do you guys think about the trajectory in the second half.
Launch curve I mean outside of the.
Outside of depleting inventory and what else needs to happen for the trajectory to really inflect in the back half of the year.
And then my second question is around the CMS draft documents, maybe remind us what you are looking for or pushing for in the final ruling in the fall and what would be considered a big win for sure. Thank you.
Yeah. Thanks, Dan it's nice to hear from you. So the first question expectations for the remainder of the year you know well we in our commercial partner CSL V for not providing forward looking guidance at this time, you know here's here's what I will say you know, we're certainly very encouraged with the accelerating trends in our key metrics, namely vials being ordered by.
Clinics had increased 46% versus the prior quarter and you know in addition, I mentioned in my prepared remarks, we're also seeing more and more clinics dosing patients specifically at the two L. D. O is worried FMC. Dennis you were at 1300 clinics dosing, that's roughly a 50% penetration and at the V. The you know we're about 400.
10 clinics now dosing, but importantly, that's up over 40% versus the prior quarter.
And most importantly, I V core soup is really holding up in the clinic and the feedback from both patients and providers has been highly positive the reorder rates, meaning once a clinic starts dosing patients. There is significant buy into the product is over 70% of these clinics.
<unk> consistently placed additional orders and I'll just conclude with this Dennis.
Although we're kind of early in third quarter I can tell you that the gross growth, we see coming out of the second quarter. We are seek we're seeing continue in the early part of the third quarter and our commercial partner CSL CSL before continues to be highly motivated and their promotional efforts continue in full force.
That's what I'll say about the second half of this year and our expectations.
On CMS, let me introduce Scott.
Who heads up our government relations in addition to being our General Counsel, who is who has led the efforts with CMS over the last couple of years. So Scott maybe you could address what we're doing with the CMS sure. Thanks, Chris.
Yeah as Chris said in his remarks with regard to the rule. We're pleased that there was new money added that's that is great and that's a very meaningful movement forward.
In our interactions with CMS and it's not just us the broader community is also.
Taking a very similar issues with CMS there, there's three things with regard to the proposed rule.
That we're going to be looking for one is is having the money follow the patient is particularly important with a product like <unk> Suva, where it is going to be used in a minority of patients.
We want to make sure that the that the funding and the reimbursement is tied to their clinical decision directly to make sure that patients get access to the product the.
The second thing we are going to be talking about is the 35% discount again, we do agree that some sort of set off for savings for.
Drugs that are not going to be used in the bundle as a result of the new drug ought to be offset in some way. That's good fiscal policy makes a lot of sense, however, with a drug like <unk> Suva, where there isn't any money in the bundle there isn't any money being spent to treat these patients are managed condition before core silver we think it's important to set off as rash.
Sure and it's tied to the actual savings and with coarser, whether there's anything there. The third thing we're gonna be looking for us for clarity after the third year, because again a drug like <unk>. There is there is no money in the bundle and what happens afterwards, so we're going to be seeking clarity on that the other thing that we're gonna be pushing CMS on and having a.
<unk> about is making sure that there is a to dapper periods for cross support core Suva that allows the community to use the product and the same and knowing what the reimbursement and funding mechanism after that should wrap up period ends right now.
The product is being used in a context, where there isn't any.
Is there would be no money out of it so we're going to be trying to get the extra to that period to try to make sure that there's good data that appropriately lives up to the patient access.
Got it thank you so much.
Yes.
Thank you.
Our next question.
Comes from the line of Annabel <unk> of Stifel.
Hi, Thanks for taking my question.
A few actually.
While we are talking back to CMS.
I guess a couple of things.
Things I guess first can you.
Maybe.
So I guess, we understand that <unk> got an extra year.
<unk> of human and I was just wondering if you can outline what similarities or differences you might have had with parse a bit given that pretty much. The only other drug that's gone through this and how they got that additional year.
And then if.
Of course, if that stays within the bundle the way that Dave described.
With this structure do you envision.
Incentive for dialysis providers to not use the dragon just collect the payments.
They might have done for <unk>. So I just wanted to understand the dynamic that we might see.
Uh huh.
And then I might have another thanks.
Alright animal I think let me unpack the first one is around.
Extending to our to DAP, a period and the rationale why and why that is the same or different in parts of it. Let me, let me give that to Scott and I may have a couple of words after yes sure. So.
With regard to parse.
It's not a great analog in one sense because the positive obviously there was an oral generic that was views afterwards, but there is one similarity with regard to why it would make sense and be consistent and with parts of the CMS was looking to get accurate information to understand how much you might add to the bundle and that's the same argument we're going to.
That at the end of the day, we don't believe that the utilization and the uptake is going to be accurate and in an environment, where there would be new money added at the end of the Super period. So we think the precedent there without regard which is get better data.
As consistent with Perceval.
Yeah, and Annabel I think on your second question, hopefully I got it right based.
Basically if I understood. The question right. The proposed methodology from CMS could suggest sort of a reverse incentive meaning that some of the dialysis organizations would be incentivize just a pocket the additional money and not use core Suva, Yeah, I'll say a couple of things I mean, one is it.
Certainly you know they could do that you know our belief is that that will not happen.
Dialysis organizations are very much used to working in the capital environment, meaning they're going to lose some money on some patients in and make some money on others.
So we remain pretty confident that the appropriate patients will continue to have access to of course, Suva and listen we all have the same northstar around patients being at the center and are kind of what we could control here at Cara and what we're really focused on is making sure that there is adequate and accurate funding.
So patients are going to have access to this drug.
That's what Scott alluded to in his earlier comments and that's really our focus.
I guess also just to be clear the D.
It also is recalculated every correct.
Okay.
That was down that's going to go down.
Alright, well technically based on their proposal that could could happen correct, but it would be calculated on an annual basis.
Okay.
And then just to switch gears for a bit.
Would you say that the reorder.
Sure.
They are independent.
Dialysis providers.
Is that about where you would expect.
We are in a race.
Normalized environment for today presenting us win.
One.
Laurie.
Washout.
Yeah, I would I mean, we've seen it pretty consistent in that 70% I mean davita is actually this month or this quarter was our second quarter, sorry was 73% <unk> seen if you look at U S. R. C, which is the largest of the M. D. O's thereabout, 80% reorder, but but I think we feel pretty comfortable that youre going to be in the range in that 70.
<unk> percent reorder rate, we've seen that pretty consistently really since the launch and I've been really pleased in the antibody we've talked before I've been incredibly pleased with that reorder rate, we don't get patient level data.
Look at reorder rates as a proxy for.
Call. It a really good patient experience and we see this consistent month to month reordering by clinics that have started dosing patients.
Okay, great and if I could just squeeze in one more.
I didn't notice it.
Is that good.
And yesterday reordering by the end of the year has that changed from your expectations.
Normalized inventories by mid year.
No I would say, we've always expected I mean, we're looking at the growth trends on a quarter to quarter basis, and we saw a 48% increase in the number of clinics now exhausting their initial stock for Q3 and reordering. That's roughly 720 clinics. If you if you see that growth continue we would.
Expect the majority of these clinics to have exhausted their.
Their inventory and reorder and again, you know with the 70 plus percent reorder rate that we would fully expect.
For a percentage, let's say kind of normalize with that I mean, it really forms a nice growth annuity as more and more patients.
Kind of get this product. So we haven't come off of that we're just kind of analyzing our growth rate and seeing if this continues we feel pretty good about about the majority of these clinics in the second half of the year exhausting their stock.
Okay, great. Thank you.
You're welcome.
Thank you.
Our next question.
Comes from the line of Joseph Stringer of Needham and company.
Hi, Thanks for taking our question now that you're a couple of quarters and that alliance.
How are you thinking about potential monetization of the IV courses in our revenue stream.
What are some of the puts and takes that go into that decision.
Hey, Joey.
So if you are referring to the ex U S royalty revenue I think you know.
What we haven't really been terribly specific about what we plan to do from a financing perspective on the non dilutive front I mean, maybe Ryan you want to say a couple words on that Joe is that your question was it related to not ex U S or were you talking about the U S revenue stream.
If you could comment on.
Well.
Would be helpful.
Yes, I will let me take one off the table in the U S. That's the that wasn't our focus where we're from a U S perspective, I mean, we get 46% of net of net sales essentially and we're really in the initial quarters of this launch and we feel there's pretty significant upside now.
We'll have to see how CMS works itself out over the next couple of months, but where our focus has been from a financing side you know Ryan maybe you could comment on the ex U S.
We are in a N a.
Good position, where we do actually have an asset that is generating cash and this is ex U S. We've discussed and Chris's prepared remarks, how well Europe is doing and how both CSL and ourselves are very excited about the potential for Europe going forward. So we are looking.
At opportunities to potentially monetize that.
We also discussed the potential approval of Japan.
In the second half of the year. That's also another potential cash generating asset. So we've got a lot of options and we're hopeful.
That we can execute on those.
Okay, great. Thanks for taking our question.
Thanks, Joe.
Thank you.
Our next question.
Comes from the line of Smart car Kearney of Canaccord Genuity.
Good afternoon. Thanks for taking my questions I have a few here.
So at what point will you or your partner and have a better handle on steady state utilization pursue IV. So you get the best possible reimbursement rates posted up.
How long do you think you can take to get to that rate.
So simandou.
Yeah, It's a tough question because you know really.
You know, we're working with one payer essentially right CMS are the dominant player in this ecosystem and dialysis and.
Understanding the funding is going to be really critical that will determine the future trajectory of this drug.
And the final rule will be sometime later this year. We're in the 60 day comment period, I think Scott summed it up nice amount I mean, we found the proposed rule. There's some positives there right I mean, they are adding additional funding.
And that's certainly a positive we're certainly moving the needle with CMS to provide access to innovation.
Probably fund it but we do have some serious concerns around the reimbursement methodology that Scott very clearly outlined that would have an impact on funding and potentially could be a headwind for us. So I would say, it's a little too early to talk about the trajectory until we fully understand.
Fully understand the CMS final rule and what that could mean from a funding standpoint long term I mean, one thing that's really crystal clear to US is that there is a significant unmet need and this drug is very effective and it actually makes a big difference in patients' lives. So as I said before patients at the center of <unk>.
Anything we do.
I know I can speak for my partner CSL V for with regard to <unk> and our focus during this comment period is really on addressing some of these reimbursement concerns around the proposed rule that they outlined but also importantly, as Scott said requesting an extension of the to dapper period, because we do know to dapple.
Ted.
As challenged some of the uptake with some physicians is listen I mean, their experiences with parse a bit and they're a little nervous that if they start patients on oncor Suva. They may have to stop and the funding is not available so.
We're really focused on on this over the US over these next I would say 60 days until CMS publishes their final rule.
Got it and then given the relative difficulty of getting out and optimal utilization rate. What do you think an optimum number of years of extension of <unk>.
Would you be asking for and when would you expect to get more clarity on that given CMS is already running a process.
Sure. Let me, let me give that to Scott to talk about our plan with the extension. Yeah. Again, we think we have a strong argument that we should get a new to that period, which is essentially two years.
Because we need to have a amount of time, where they can get the full ability to manage the utilization and get the right patient access based on what the funding is going to be.
With regard to when we would hear.
We we.
Expect theres not a specific rule for how that would happen, but we would expect to hear and we would ask to here in the November final rule, what the plan was.
Got it thanks.
Thanks, so much.
Thank you.
Please standby for our next question.
Our next question comes from the line of David <unk> of Piper Sandler.
Hey, thanks so.
I apologize if I missed any any color here, but.
As you think about the cash runway and the upcoming.
Clinical milestones can you talk about how you're thinking about <unk>.
Strategically in terms of.
Whether this is something you would look to monetize in some way.
Or.
Or keep it and commercialize it I'm just trying to get a better sense of.
How are you thinking about the asset just given.
The cash runway and.
And resource constraints. Thanks.
Hi, David This is Ryan I'll I'll start out and kind of give some color on on our investment and oral <unk> and then I'll pass it over to Chris to talk more about.
Long term strategy for it so the good news is.
That we can fully fund that fella, Catherine and these three late stage programs and Thats critical and Thats, what we actually are working on here at Cara.
Obviously CSL is running the launch for <unk>, but what we are spending our money. Our investment is on these three programs. So in the guidance I gave you.
Those three programs.
Vic dermatitis.
Chronic kidney disease, and Natal, Japan static are fully funded.
Chris now to talk about how we think about it David I mean, we still remain very focused on on.
Developing these two franchises from a commercialization standpoint.
We've been very public is saying, we would certainly look and we would look for ex U S partners. We do not have an intention right now of commercializing ex U S and I would remind you and I know you know this.
We own the rights to oral diphenyl, a caf went outright.
So we would certainly look outside the U S for a partner in the U S. You know our intention is to stand up a commercial organization.
To maximize the potential of these products and do it alone.
Okay. That's helpful. If I may sneak in one or more of this is unrelated on.
In Europe .
Can you remind us what pricing.
For the drug is.
Obviously, it varies market to market, but.
How should we think about pricing in Europe , and the big in the big markets at least relative to the us.
Yes, I mean, so David you're right I mean, it varies market to market.
What I can tell you in Germany for example, the price per vial I believe is around 48 euro per vial. So.
Kind of a third of what we have in the U S. It's probably a good way to think about it I think.
We're really encouraged in Europe as you know the patient population in the EU five predominantly is not that dissimilar to the U S. And you were seeing you know Ryan alluded to it earlier, we're seeing pretty good uptake or very good uptake actually since we launched in Germany in the fourth quarter of last year in terms of.
Both growth in patient sales. So we're actually really encouraged what we're saying you know reimbursement is very different again.
Don't have it to dapper sort of system or a cliff so to speak onto dapper.
So you know in CSL has got a very good commercial footprint.
Executing really nicely.
Okay. That's helpful. Thank you.
Thanks, David.
Okay.
Thank you again to ask a question. Please press star one one on your telephone again Thats Star one one on your telephone to ask a question.
Our next question.
Comes from the line I'm, Jason Goldberg.
<unk> of America Securities.
Hey.
Chi on for Jason Thanks for taking the questions.
I guess rigs.
Regarding the comment about we expect to hear back from CMS on.
Any update or change to that proposal and the final ruling sometime this fall a slash wind her.
Can you remind us sort of like.
If you do get the if you do or.
It did not get the addition of <unk>.
Can you help us understand say if you do not get the additional debt that how do you think about consensus SaaS to make that point. This house in 2024 versus 2023, what im trying to get at as if the reimbursement mechanism.
Such that the.
CMS will look at the prior year Utilizations apply a 35% in here.
Oh.
Just trying to understand do dialysis and it's just simply have to give up.
Other treatment in order to make wafer volume I'm, just trying to get a sense that setup the disconnect between what.
Contractors are forecasting versus the CMS proposal.
So typically the extent that you can provide a color that would be great and then a follow up after that sure I won't comment on consensus necessarily but I think your analysis on how this works within a catheter system is correct if nothing's changed.
The onus is on the.
Dialysis facilities.
To fund the product and actually compensate for it by looking at other avenues within that bundled rate. So what we expect there or well what I would say what we're doing is obviously working with CMS now in the in this comment period, and Scott mentioned earlier around voicing our concern.
Turns with the reimbursement methodology, we have some concerns around how theyre going to calculate the additional funding, but let's be clear there is gonna be additional funding added to the bundle in their proposed rule.
And when we kind of understand where CMS is going to land with that as well as the extra to DAP up period that Scott mentioned, we will have a better sense.
The trajectory of this drug based on the ability of dialysis facilities to resources.
And that'll be critical and that will determine kind.
The future of this drug.
And again, we're encouraged that.
Encourage I would say we're confident that we have a strong case for additional to that at the time that that Scott mentioned.
We're certainly not going to handicap that at this point I mean, we are we are working closely with CMS or at least providing comments of them and we'll engage with them. During this period of time.
Uh-huh so.
You may have been having a stern here. So you have a 60 day comment period and then you have this proposal coming out sometime in October November is that set up like a two way dialogue between the U S or is it sort of more like <unk>.
Comment and you won't hear anything until October November timeframe, just help us think about the level of visibility you have between now and when a final proposal comes out.
Sure, let me give it to Scott.
So we'll be provide as you said, we'll be providing comments during the 60 day period, we will engage with CMS to provide more information.
We would not expect to get anything back from them before the rule.
We're in a comment period they have rules they have to follow we wouldn't expect there'd be any information back directly to us or certainly publicly before that November rule came out.
Okay, maybe just one last one from me.
Can you just talk about remind us sort of the connection between the manufacturing and supply revenue on <unk> and the <unk>.
<unk> and the recognition of IV <unk> it looks like it looks.
Mainly attract fracturing supply ramping it looks a little light this quarter.
And but yes, those are sequential increase into revenue. So is it just the nature of lumpiness or does that lights out light is.
We are leading.
Kate I'll tell about how much.
Ivy <unk> proper order from camera.
Chi This is Ryan Thanks for your question I would start by saying there really disconnected in the short term.
The commercial supply revenue is basically us shipping vials to V for based on the release from quality, because we're basically manufacturer acting as the Manny.
Manufacturing <unk> for <unk>, four and as we get vials released from quality, we ship them immediately to V for under a P. O. So theres no connection to short term demand and as you know the <unk>.
IV course Hoover revenue is based on shipments from <unk> four to the wholesalers and that's how we recognize revenue. So you are correct in the sense that this shipment of commercial supply revenue was down from the prior quarter, but that was simply based on.
The the QA releases, we get from our.
<unk> provider.
Okay, great. Thanks for answering the questions.
Thanks, Joe problem.
Thank you I would now like to turn the conference back to Christopher Posner for closing remarks, Sir.
Thank you Latif well, thanks, everyone for joining us today and I just wish everybody a great afternoon with that I'll end the call.
This concludes today's conference call. Thank you for participating you may now disconnect.
Okay.
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Okay.
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