Q2 2023 Seres Therapeutics Inc Earnings Call
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Okay.
Ladies and gentlemen, thank you for standing by my name is statutory and I will be your conference operator today.
This time I would like to welcome everyone to distinguish therapeutics second quarter earnings Conference call. All lines have been please on mute to prevent any background noise. After the Speakers' remarks, there will be a question and answer session. If.
If you would like to ask a question. During this time simply press star followed by the number one on your telephone keypad.
If you would like to draw your question again breast the star one.
I'd now like to turn the conference over to Dr. Carlo Tanzi head of Investor Relations. Please go ahead.
Thank you and good morning, our press release for the company's second quarter 2023 financial results and a business update became available at seven am Eastern time. This morning, and can be found on the investors and news section of the company's website I'd like to remind you that we will be making forward looking statements, including the commercial success of the house.
The timing and results of clinical studies, the ability for microbiome therapeutics to modulate the microbiome and treat or prevent infection, our ability to achieve sales targets and the receipt of future milestones and debt tranches and other statements, which are not historical fact.
<unk> results may differ materially.
Additionally, these statements are subject to certain risks and uncertainties, which are discussed under the risk factors section of our recent SEC filings any forward looking statements made on today's call represent our views as of today only we may update these statements in the future, but we disclaim any obligation to do so on today's call with prepared remarks I joined.
Eric Schadt, she was president and CEO , Dr. Lisa Barton bulky Chief Medical Officer, Dr. Terry Young Chief commercial and strategy Officer.
David Archuleta Chief Financial Officer. In addition, Dr. Matthew can chief Scientific Officer will also be available to answer your questions with that I'll pass the call to Eric.
Thank you Carlo and good morning, everyone.
This has been a monumental period for series M.
Indeed based on the progress we have made developing a microbiome therapeutics as a new medical category.
<unk> was recently nominated as a member of the time 100, most influential and influential companies for 2023 within the pioneers category we.
We are proud of the recognition, but more importantly, we are glad to now be making a positive difference in patients' lives with the recent approval of our first microbiome therapeutics.
On April 26th we were thrilled to announce that the F. D. A approved Thou'st indicated indicated for the prevention of recurrent C difficile infections and adult following antibiotic treatment for recurrent C D I.
We believe valves has the opportunity to transform how patients with recurrent C. Diff infections are managed providing a new meaningful therapeutic option for patients facing this disease.
In addition, we were very happy with the label that we received which includes all adult patients with recurrent CDI, including those with the first recurrence.
We are now working to commercialize vast alongside our collaborator Nestle Health science.
<unk> has been available since early June and we are pleased to report that preliminary uptake has been highly encouraging with healthy product demand coming from a broad set of health care practitioners and across the recurrent CDI patient pool, including in patients with their first recurrence.
Terry will provide more detail on launch progress shortly.
The successful commercialization of <unk> is our top corporate priority and the clear focus of our organization.
Overtime, we expect that <unk> will provide tremendous benefit to patients and in turn we anticipate this therapeutic will represent an important financial driver two series.
As we commercialize it out we continue to expand our drug supply in collaboration with our manufacturing partner rest of farm two enhanced feature supply capacity further.
Furthermore, our collaboration with Baxter era also continues to move forward and we anticipate that back Sara will begin to produce commercial drug product next year for release in 2025 as the vast market continues to expand.
While executing the vast launch we also made meaningful progress with our earlier stage pipeline.
In May we reported highly promising phase one b cohort one clinical data from our <unk> five program.
<unk> cultivated microbiome therapeutic candidate is designed to prevent infections and or gvhd in patients undergoing H S E T.
Initial data may support our therapeutic objective of reducing serious enteric infections resulted in bloodstream infections and gvhd and this medically vulnerable patient population.
The tier one side five study continues to enroll and we anticipate top line clinical results from the placebo controlled portion of the study encompassing phase II. So I'm sorry cohort two in mid 2024.
I would like to pass the call now over to Lisa.
Thanks, Eric I'll begin with a house a product consisting of a consortium of firm acuity bacteria in their spore form.
This therapy is designed to facilitate restoration of the Gi microbiome, and thereby reduce the risk of future recurrences of C difficile infections.
Importantly, the indication we received with the FDA approval is for the broad population of adult recurrent patients.
First has a straightforward all dosing regimen for capsule once a day for three days following antibiotic treatment and use of a laxative to remove residual antibiotic from the Gi tract.
Most it's stored in the original packaging and has no refrigeration requirement.
The full label is available on <unk> website at <unk> Dot com.
To briefly recap the vast approval was supported by remarkable clinical data from two phase III studies.
Our placebo controlled eco score three study demonstrated that approximately 88% of patients did not experience a recurrent at the primary eight week endpoint compared to 60% in the group with antibiotics alone.
We also observed durability of response out to 24 weeks.
Oh, it was well tolerated and patients administered the drug had no serious adverse events or deaths that were attributed to study drug.
Recurrent CDI is a serious disease that often results in hospitalization and can even lead to death.
There are an estimated 156000 recurrences United States per year, and at least 20000 deaths due to C diff infections.
Patients suffered debilitating symptoms such as frequent diarrhea, which prevents them from conducting their normal daily activities and these symptoms significantly lower quality of life.
We along with our Nestle Health Science colleagues continue to present and publish clinical results to educate the medical community about recurrent CDI and <unk>.
We provided support for our continuing medical education event at the American College of Physicians annual Congress in April and we participated in the digestive disease week annual meeting in May.
Interest in <unk> at the conference was extremely high endurance O L. Engagements, we continue to observe significant levels of enthusiasm about the potential to use valves to stop this cycle of recurrence of CDI and eligible patients.
Moving now to our new SER 155 results, which we've previously discussed in detail.
The medical literature supports a strong connection between pathogen domination and lack of diversity in the Gi tract with the endpoint of infection graft versus host disease and mortality in patients undergoing allo HFC T.
SER 155 is an oral investigational cultivated microbiome therapeutic designed to prevent and character arrived infections, and resulting bloodstream infections as well as to induce immune tolerance responses to reduce the incidence of gvhd and particularly severe acute GBH.
D in patients undergoing L O H S E T.
But the development of SER 155 is supported by strong exploratory proof of concept data from the SER 109, Eco spore three study.
Which showed that SER 109 administration resulted in the D colonization of gut pathogens beyond C difficile.
Including bacteria carrying antibiotic resistance genes.
These data have been previously reported at various conferences.
Hello, HFC T patients are at high risk of enteric derived infections and acute gvhd.
These adverse events are frequently seen in the first 100 days following the procedure.
This is a period when the patient's microbiome are highly disrupted from numerous factors, including antibiotic treatments and chemotherapy regimen.
And their immune systems are severely compromised.
In May we announced initial safety and pharmacology data from study cohort one.
Based on these data a favorable tolerability profile was observed with no serious adverse events attributed to SER 155 administration.
Pharmacology data showed that bacteria in the SER 155, consortia in grafted populating the Gi microbiome.
With a magnitude and kinetic profile consistent with expectations based on prior clinical results from other series Microbiome Therapeutics.
Importantly, we observed that the cumulative incidence of domination with bacterial escape pathogens was rare and observed at substantially lower incidence rates than observed in a reference population of allo <unk> patients.
These are specific pathogens known to be associated with the risk of enteric, driven bloodstream infections and other downstream consequences, such as gvhd in patients receiving allo HFC T.
Enrollment is ongoing in cohort two which incorporates a randomized double blind placebo controlled design to further evaluate safety in an grassman as well as clinical outcomes.
This portion of the study will enroll approximately 60 subjects administered either SER 155, or placebo at a one to one ratio and.
And we anticipate obtaining cohort two study data in mid 2024.
And with that I'll now turn the call to Terry.
Lisa.
I am pleased to report that along with our collaborators at Nestle Health Science, we are making great progress in the early days of the valves launch.
As Eric mentioned, we are highly encouraged by the magnitude and breadth of HCP demand that we've seen.
This demand is consistent with our understanding of the enormous need for better options to prevent RCD I mean, Louisiana stick reception that the profile of valves <unk> received since the release of our first phase III data nearly three years ago.
That performance. We've observed also confirms that our commercial strategy knowledge base and launch execution are setting us up for success.
We've been very focused on four areas during the early launch period scaling our HCP education efforts.
Creating a positive customer experience.
Stablish and payer coverage and optimizing hospital outflow.
First I'll describe our HCP education efforts.
Immediately after FDA approval of <unk>, the nestle customer facing field teams were quickly trained and deployed.
The field sales teams have been promoting balanced and generating HCP demand since may 2nd several weeks before product became commercially available in early June .
As a reminder, the two necessarily field sales teams are comprised of.
150, Gastroenterology Representatives and a 20 person hospital in infectious disease focus selling team.
We were also fortunate to have the DW conference that Lisa referenced earlier in mid May right on the heels of approval.
We had a significant presence at that key Gastroenterology conference, including a highly attended product theater and a large wall Mansfield.
The reaction to the profile of <unk> continues to be enthusiastic and positive.
Hcp's consistently mentioned the impressive efficacy and are encouraged to finally have a scalable highly effective option.
Their number one unmet need in our CDI preventing recurrence.
As a result of our education efforts, we have observed the following magnitude and breadth of HCP demand as reported to us by Nestle Health Science.
Early demand is broad across eight Cps in patients, which is something we are very pleased to.
Importantly, we are seeing use across the recurrent patient pool, including demand in patients experiencing their first recurrence.
The hcp's are choosing these patients as their very first patient for <unk> is highly encouraging and you may recall that this is the largest patient pool within recurrent CDI.
We are seeing utilization across a broad HCP audience and received prescription enrollment forms from over 480 unique prescribers as of July 27.
With approximately 70% from gastroenterology and the remainder from other specialties.
There is also a group of 1000 prescribers, who are not on the field teams call list, which is an indicator of the high unmet need and strong awareness in the provider and patient communities.
Finally of the more than 408, <unk> that have prescribed valves 78 have prescribed valves to multiple patients in their practice.
This early depth of prescribing has a very positive sign given the moderate CDI patient volume, which typically exist at the individual HCP level.
The second area of focus is providing a positive experience for patients and providers are.
Our valves voyage hub is a critical component of our commercial effort and provides a robust high touch experience, including treatment and financial support.
The valve voyage team has been diligently working to convert patient enrollment into new patient starts.
As with any new branded product during the early launch period, where payer policies are not in place the prescriber must navigate the medical exception process.
Our team is highly skilled at supporting providers and patients as they seek approvals for valves.
But in the event that it takes longer than the treatment window for vast allows we offer a free drug option for eligible patients.
This is one of several financial assistance programs, we are providing in this early launch phase and we are seeing expected utilization of our patient assistance programs.
For example, approximately 43% of the 282, new patient starts were dispensed via our free drug programs.
Our third focus area is engaging with payers to build coverage so that each patient who can benefit from valves has access as quickly and efficiently as possible.
That necessarily pay your field team continues payer engagement building on the extensive preapproval information exchange efforts executed during the year prior to approval.
Team is making progress and is prioritizing the most important stakeholders, including the three largest pbms to reinforce the compelling value proposition for avast.
We expect to see coverage policies issued as we move through the second half of this year.
During the early launch period, we are seeing approximately 57% of our 282, new patient starts reimbursed through the patient's drug benefit.
Finally, the hospital selling team continues its efforts to enhance hospital outflow and we believe these efforts will begin to bear fruit later this year into 2024.
On a related note last week CMS issued their final rules for inpatient reimbursement for 2024.
Included in that was the approval of a new technology add on payment or end cap for <unk> when used for patients treated in the inpatient setting.
The result of this is that hospitals will receive extra payment for any Medicare patients treated with <unk> in the inpatient setting next year.
We are pleased that voucher received this additional payment from CMS.
CMS.
Final rule that the agency considers valves to be of substantial clinical improvement over existing technologies and that they see the importance of the technology and restoring the gut microbiome.
We know that at the proportion of patients who had received <unk> in the inpatient setting is smaller than our outpatient opportunity and we do not expect that the Encap will result in a significant number of additional patients in the near term.
However for these patients who are undoubtedly among the sickest.
We are pleased that CMS has addressed the financial barrier for a hospital that chooses to use a therapy that Medicare is recognized as a substantial clinical improvement.
We believe that over time the end cap approval could result in additional inpatient utilization.
In summary, we are highly encouraged by these early results, we along with our collaborators at Nestle Health Science will continue our focus on HCP education customer experience payer coverage and hospital outflow and we expect to see continued acceleration of demand progress on the payer front.
And optimization of the provider and patient experience as we move through the coming quarters.
Now I'll turn the call over to David to cover our financials for the quarter.
Thank you Terry the details of our second quarter financials are included in the press release issued this morning, So I won't reiterate all the figures here series reported net income of $46 6 million for the second quarter of 2023 as compared with a net loss of $64 7 million for the same period in 2022, the net income.
In the second quarter of 2023 was primarily due to the $125 million milestone received from Nestle upon FDA approval of <unk>.
<unk> net sales for the partial commercialization period during the second quarter was $1 $6 million and based on 105 units of valves sold during the period. The net sales reflect estimated gross to net reductions of 15% primarily due to returns reserve prompt payment discounts and patient co pay assistance.
This gross to net reduction is an estimate based on certain assumptions and limited information will be refined over time as additional information becomes available.
As Terry mentioned, we are actively engaged with the three largest pbms and as a result, the second quarter gross to net reductions do not reflect any discretionary payer contracting.
Once <unk> became commercially available in early June we started sharing equally with nestle in the commercial profits and losses.
<unk> profits and losses are determined based on <unk> net sales cost of goods sold and sales and marketing expenses.
The total value loss in the second quarter in other words from when <unk> became available in early June June 30 was $4 3 million and our share of that was $2 1 million. This amount our share of the <unk> loss for the second quarter is included in our P&L in the operating expense section as collaboration prop.
After loss sharing related party.
We are responsible for supplying <unk> inventory to nationally we built up sufficient levels of supply in in anticipation of launch and we are continuing to produce <unk> in support of the launch in the near term, we expect to receive payments from nestle related to thereabouts supply purchases and in the future. We expect a steady pattern of purchases by.
Nestle to meet market demand.
For example, during the second quarter, we purchased seven 6 million or about supply from us and we received the payment related to this purchase in the third quarter.
As of the end of the second quarter, we estimate that there was less than two weeks of <unk> inventory in the channel at the specialty pharmacies based on forward demand, which is typical for this stage of the launch.
Following the approval of <unk> commercial manufacturing costs will no longer be recognized its R&D expenses in our P&L, but instead will be capitalized and recognized on our balance sheet as inventory.
Because of the commercial manufacturing costs are now being capitalized we expect that our total R&D expenses will decline going forward.
For additional context, our second quarter 2023 financial results reflect the total R&D expenses of $47 million of which approximately $11 million was vast commercial manufacturing costs incurred prior to FDA approval.
Series ended the second quarter of 2023 with $229 5 million in cash cash equivalents and investments as compared with $181 3 million at the end of 2022.
In June we received $125 million milestone payment from naturally associated with the FDA approval of <unk> in April we announced that we had entered into a new $250 million senior secured debt facility provided by Oaktree. We drew the first tranche of $110 million at closing and after retiring our previously outstanding debt and deducting.
Fees and expenses the net proceeds to us were approximately $50 million. This debt facility has three additional tranches available which are comprised of two tranches of $45 million. Each based upon the achievement of certain applicable valve sales targets and an additional $50 million will be available to us at Oaktree has discretion to support potential future business developed.
Activities.
We remain highly disciplined with our cash deployment and we are prioritizing the successful commercial launch of <unk>.
And the development of SER 155 examples of actions taken in areas that we are pursuing to reduce cost and drive efficiencies include.
We closed one of our three donor collection facilities supporting vast manufacturing, thereby reducing costs without impacting our ability to meet anticipated market demand disclosure was enabled by three year shelf life as well as operational efficiencies related to the production process.
Also our centralized donor screening lab opened in the second quarter, allowing us to in source donor medical testing, which is expected to result in future cost savings.
Also actively consolidating office space and seeking to reduce our footprint, which enables us to be more efficient and save costs.
And as we are allocating our resources in order to generate the greatest returns we have reduced our head count from the beginning of the year in part driven by the closure of our donor collection facility that I just mentioned.
These are just some of the actions we are taking in areas. We are exploring we are committed to further reducing costs and we'll share additional updates with you.
I'll now turn the call back to Eric.
Thank you David.
This is an exciting period for series as we are now commercializing.
The first ever FDA approved orally administered microbiome therapeutic.
The launch is in its early days and we are very pleased with the initial commercial results.
Since obtaining the phase III <unk> III data in 2020, we believed that we have the opportunity to help transform how individuals with recurrent CDI are managed and we are pleased to see the early signs of this transformation occurring in the medical community.
Over time, we are optimistic that vast uptick will continue its continuing to accelerate and we expect that over time. This product will become an important financial driver for series.
We are also very excited about the progress we are making with SER, one slide five and the data we have shared during the quarter.
We are hopeful that the initial data that we have seen will translate into meaningful clinical results and we are looking forward to providing a robust clinical data set from cohort two next year.
Before I close I'd like to touch upon the momentum that we continue to observe within the scientific and medical medical communities regarding the microbiome and its relationship to serious infectious diseases.
Last year, the NIH hosted a workshop on the topic to advance research into the medical significance of Gi pathogen abundance.
At the upcoming <unk> Conference Symposium is being held on the establishment of pathogen Z colonization as a surrogate for infection risks.
The validation of this link would be highly valuable to series and supportive of our microbiome development efforts.
We have previously discussed our own clinical results lifting Gi microbiome health with the risk of CDI recurrence and we are confident that over time.
State of the microbiome will be will more clearly we will be more clearly linked with the risk of other serious infections.
Importantly, this would have positive development regulatory and commercial implications that could be highly advantageous to our platform and our ability to develop and market new therapeutics.
This is a topic of great interest to our company and we look forward to discussing these concepts in depth in the future.
With that I will conclude our remarks and open the line for questions.
Thank you the floor is now open for your questions to ask a question at this time. Please press Star then the number one on your telephone keypad.
We'll pause for just a moment to compile the Q&A roster.
Your first question comes from the line of Joseph.
Hey, Colin your line is open.
Hi, there good morning, and congratulations on the launch and thank you for taking my questions.
Maybe the first one can you talk a little bit more on maybe the current timing.
Between receipt of a prescription enrollment form and new patient start.
Maybe asked another way.
What proportion of those prescription enrollment forms mentioned in the press release.
Do you expect will turn into new patient starts I guess over the next kind of quarter here, especially as it relates to that.
Treatment window that.
Allowance and then its great that youre seeing interest across the refractory.
Recurrent Peter environment are you seeing kind of equal ease in getting this therapy to patients.
Regardless of kind of where they are in their in their treatment journey.
Yes.
Joe Good morning, and thanks for the question, so I'm going to ask Terry to comment on.
On the timing or evolution.
A script and then the second is just access across different recurrence.
Sure. So I would I would start by saying that the vast majority of patients that are seeking access to <unk> today and going through the medical exception process are coming through.
So we're being successful in the vast majority of those cases, it's important to note. When you look at the enrollment forms versus the new patient starts that we're seeing huge demand for new patients building over time right. So a lot of the enrollment forms that we're getting are more recent versus from May for example.
So the hub has been very very busy as I mentioned in my prepared remarks turning.
Enrollment forms into new patient starts, but the demand has been building over time as you would expect with any launch so I would expect as we move forward, we'll be accelerating the transition of the conversion of enrollment forms to new patient starts as you would expect.
So we feel like we're being very successful early on in this speaks to the investments that we need and selecting the right partners in terms of how provider, but also specialty pharmacies and making sure that we provided and invested in a very high touch robust patient experience. So we're seeing this pay off for US now early on in the launch and we would expect that to.
Continue over time.
With respect to where the patient is in their recurrence journey.
Whether they're first second or third really the determinant for us in terms of how we are billing the physician demand is where they are in the antibiotic prescription right. We are deploying our selling teams and making sure that we educate providers that they need to write down.
At the same time as the antibiotic to provide the maximum time and the treatment window to fill the prescription. So we do feel like those education efforts are paying off but it will continue to take time. So that's the reason why we put forward the voucher program as one of our patient assistance programs at such a point in time, where.
The patient is reaching the end of their antibiotic regimen.
And we haven't been able to get plows through the medical exception process. It will trigger the offering a free drug. So we feel like we have the right tools in place and the right support and assistance in place to ensure that we are continuing to translate our physician demand and to new patient starts.
Anything you want to add Eric I think I'd be concerned.
I guess, Jeff from me.
To Terry's points.
We're seeing the demand, which I think is first and foremost we.
We would hope to see and we are seeing the pull through including first 100 patients. So so overall very very encouraging.
Perfect and then maybe just one quick follow up on a more of the financial.
Component I guess as it relates to closing one of those three.
In our facilities and then opening that control screening facility I guess, what sort of scale should we expect on cost savings from that and is that more of a Q4 kind of savings in the 'twenty 'twenty four how should we be thinking about that thank you.
Yes, maybe David can comment Joe as far as the donor facility. There is both a component of the facility itself.
We will seek to sell.
Sublet the space.
There is approximately I think its 18 ftes.
The savings will be more of a 2024 item we may see some pieces of it at the end of 2023, but keep in mind there'll be a period cost savings as well as efficiency that will eventually roll through into Cogs, and maybe David can comment further including on Maquila.
Yes.
That's exactly right I would look for savings to be realized in 2024 going forward and I think also as it relates to donor testing. There is there is a ramp up there as our volumes increase so I think I think.
One would start seeing that in 2024 and beyond.
Perfect. Thank you very much.
Thanks for the questions Jeff.
Yeah.
Our next question comes from the line of Android Kantar.
With Piper Sandler your line is open.
Great. Thank you very much and congrats on a strong.
Chart with Rouse really exciting and I know, it's an important product. So a couple of questions. If I may.
Firstly, just kind of a housekeeping question may be a little bit early but.
With the cash on hand are you able or did you.
Mr provide guidance in terms of what kind of runway.
That is with the milestone of the new debt.
And then as it comes to gross to net do you anticipate that 15% to go up or down or what do you think we should be expecting in terms of price.
Again, congrats on the launch.
Yes, hi, good morning, and thanks for the questions.
Yeah.
David the comment on the runway and Terry to comment on gross to net or maybe David and I'm, sorry, I think the answer to the second one is yes, we do expect to go up but they can provide better better perspective for more fulsome perspective.
David on the cash yes, thanks, Thanks Ted.
As we discussed we ended the quarter with approximately $230 million in cash cash equivalents investments.
We have not provided.
We have not provided runway guidance.
I would just say we are we are.
Focused on as we talked about opportunities to reduce our our spend going forward as well as we think there's tremendous opportunities to generate value as it relates to the <unk>.
Launch and progress there on the on gross to net.
As we talked about second quarter gross to net was 15%, we're not providing projections at this juncture and as we indicated the gross to net in the second quarter does not include any discretionary payer contracts.
At this point in time, so let me turn it over to Terry for additional color.
So it's important to understand what's in the 15% and what's not so this is comprised of what it takes for us to get product to patient right and through the channels.
She'll be pharmacies distributors, so on and so forth and it also contains estimates for our co pay assistance programs as well as mandatory rebates Medicaid and government program, so on and so forth and when it does not contain as David.
Shared is discretionary rebate discretionary rebating is one tool that we have to ensure that we have broad robust patient access, but I would also kind of counter that by sir balance it by saying that whilst has an incredibly robust value proposition supported by its clinical profile, but also by the fact that these patients are.
Incredibly expensive and if you use valves early on in the treatment paradigm and we are seeing new Sir.
We achieved significant cost offset so we're going to be very judicious and thoughtful regarding how we leverage discretionary rebating moving forward.
As we do move forward through the following quarters and have more color to share we will do that.
Yes.
Thanks, Steve.
Thanks, Doug.
Next question comes from the line of Tessa Romero with Jpmorgan. Your line is open.
Great.
Thanks, so much for taking our question Hi, Eric and team.
So the three largest pbms are you able to give us a sense of cadence of the expected decision.
Based on the cycles.
On the call you noted that 43% of your 282, new patient starts were dispensed by a free drug program just trying to get a sense of how you expect this to trend in the next couple of quarters here.
And then.
Second question from me is can you give us a sense of what the new patient starts are looking like month to month qualitatively any trend you'd point out between June and July .
Thanks, so much.
<unk> good morning, and thank you for the questions I'm going to ask Terry to comment on or both.
The the Pbms.
And so over time and then.
Kind of anecdotally, what are we seeing and maybe ill add some comments on their hands.
Sure. Good morning cast with respect to the Pbms cadence that those conversations are actively in progress I would say and really began.
Even even prelaunch right with a preapproval information exchange, we made sure that pay your field teams recovering.
Very very important customers.
During that they understood the data and where we thought valves with best utilized and value proposition. So they are really going in now to reinforce those historical conversations that they've had.
And spend time with the clinical teams and then you typically enter this phase of additional discussion slash negotiations and and that's really still the con that we see that these conversations playing out over the rest of the year and I look forward to sharing more as we have more to share.
Free drug you asked about.
The free drug utilization is in line with the estimates that we had preapproval.
We're pretty pleased about that.
This is an important tool for us to provide a positive patient and provider experience very early on and we feel like that will pay dividends to us later on with respect to demand.
What I'll also tell you, though there are really two important components to the free drug program. One is the voucher program, which is triggered when a patient exceeds the treatment window.
We're trying to navigate the medical exception process with them.
So this is something we anticipate it's a program really we anticipate working itself out of a job. If you will to a large extent is payer policies are issued and the prior authorization processes become more automatic.
They will become quicker and patient shouldn't need to leverage that program as much as they might today.
Element of free drug is a more traditional income qualification path and we are seeing utilization of that program largely by Medicare patients today, and we already we always knew that Medicare patients would have affordability challenges until the IRI takes effect, but in 2025, when the cost sharing provisions and benefit design changes.
For part D as mandated by the inflation reduction that we would anticipate this being another program that we see decline.
So hopefully that color helps.
Maybe I'll just add.
On top of that in general.
It's early so we're certainly cognizant of the fact that it's early but we saw strong demand we saw it across.
<unk>.
<unk> specialties, we saw it across recurrent CVI patient profiles, including first recurrence. So while early we're really encouraged with what we've seen and we're excited to continue executing on the launch with with Nestle and we did see to your final question growth month on month as you would expect so we are seeing growth is in.
During the months in the periods.
Okay. Thanks, so much for taking all of our questions.
Thanks for the question.
Next question comes from the line of Jeff <unk>.
Geoff Johns with Oppenheimer. Your line is open.
Thank you very much and.
Congratulations on a great quarter.
With.
Defense sales can you comment on the.
How much of that $1 6 million in Q or attributable to inventory build or channel stocking versus new patient starts.
And the second question can you provide any additional color to understand the profit share reported versus revenue Andy how you see that trending moving forward. Thank you.
Yes, Jeff Good morning, and thank you for the questions maybe.
And I can handle those two on the first.
There is an initial.
<unk> purchase of inventory.
Inventory from Nestle, but in terms of.
Yes.
Build of inventory build I think David in his prepared remarks had a comment on how much was in the channel which is not that much.
But beyond that I, maybe I can just comment that Debbie can take it further.
We didn't expect to see we don't think we have seen.
Warehousing of patients right. This is not a chronic disease. This is an acute disease.
And.
The breadth of prescribers that we have seen I think suggests to us that.
Whereas we did hear a couple of anecdotes of some of the physicians that we know well that had a number of patients on vapor and they've been waiting for the moment that that vessel will be available.
Some of those patients.
That was really the minority of what we saw in this first period of launch so I don't think that there is a.
Inventory, that's really pushing this this number.
And maybe David can comment further and on the second question as well, yes. Thanks, Thanks, Erik Yes, as we reported second quarter sales.
$1 6 million it was comprised of 105 <unk> units.
Our estimation is at that point in time that represented less than two weeks of inventory in the channel as a specialty pharmacy. So.
There isn't there is not a whole lot of <unk>.
Channel inventory.
That would be our expectation going forward as well.
I think your second question was was about.
Valve sales versus the net loss sharing.
So what we reported the $1 6 million those those are the.
Net sales of <unk> for the second quarter.
That then generated a net loss of $4 3 million.
Which is shared 50 50 between Nestle and series. So our books reflect that $2 1, million% to 50% of that $4 3 million, how thats going to change over time as sales increase we are driving with our collaborator nestle towards generating profitability as it as it relates to the <unk>.
<unk>.
We think we think that's very much achievable.
And if you think about the sales and marketing expenses, we have the we are.
Fortunate to leverage nestle's infrastructure and capabilities and believe that we can commercialize fast in a very cost efficient manner.
Great. Thank you guys for taking the questions.
Thanks for the question Jeff.
Again, if you would like to ask a question Press Star then the number one on your telephone keypad.
There are no further questions at this time I would like to turn the call back over to the management team.
Thank you operator, and thank you all for joining US. This morning, we look forward to updating you on our progress soon have a great week, thanks very much.
Okay.
Ladies and gentlemen, thank you for.
For ladies and gentlemen, this operator has concluded you may now disconnect.
Okay.
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