Q2 2024 Avadel Pharmaceuticals PLC Earnings Call
Greetings, and welcome to Avadel Pharmaceutical's second quarter 2024 earnings call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. As a reminder, this conference is being recorded.
Operator: At this time, all participants are in a listen-only mode. The question and answer session will follow the formal presentation. As a reminder, this conference is being recorded. It is now my pleasure to introduce Austin Murtagh of PrecisionAQ. Thank you. You may begin.
It is now my pleasure to introduce Austin Murtagh with PrecisionAQ. Thank you. You may begin.
Austin Murtagh: Good morning, and thank you for joining us on our conference call to discuss Avedel's second quarter 2024 results. As a reminder, before we begin, the following presentation includes several matters that constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those contemplated in such forward-looking statements. These risks and uncertainties are described in Avadel's public filings under the Exchange Act, including the Form 10-K for the year ended December 31st, 2023, which was filed on February 29th, 2024, and subsequent SEC filings.
Speaker Change: Good morning, and thank you for joining us on our conference call to discuss Avadel's second quarter 2024 results. As a reminder, before we begin, the following presentation includes several matters that constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.
Speaker Change: Forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those contemplated in such forward-looking statements.
Speaker Change: These risks and uncertainties are described in Avidel's public filings under the Exchange Act included in the Form 10-K for the year ended December 31, 2023, which was filed on February 29, 2024, and subsequent SEC filings.
Austin Murtagh: Except as required by law, Avadel undertakes no obligation to update or revise any forward-looking statements contained in this presentation to reflect new information, future events, or otherwise. On the call today are Greg Divis, Chief Executive Officer; Richard Kim, Chief Commercial Officer; Dr. Jennifer Goodman, Senior Vice President of Medical and Clinical Affairs; and Tom McHugh, Chief Financial Officer. At this time, I'll turn the call over to Greg.
Speaker Change: Except as required by law, Avadel undertakes no obligation to update or revise any forward-looking statements contained in this presentation to reflect new information, future events, or otherwise.
Speaker Change: On the call today are Greg Divis, Chief Executive Officer, Richard Kim, Chief Commercial Officer, Dr. Jennifer Goodman, Senior Vice President of Medical and Clinical Affairs, and Tom McHugh, Chief Financial Officer.
Speaker Change: At this time, I'll turn the call over to Greg.
Gregory Divis: Thank you, Austin. Good morning, everyone, and thank you for joining us for this quarterly update. Following my opening remarks, Richard will provide an update on our launch progress, Jennifer will walk through our Phase 3 Idiopathic Hypersomnia, or IH, clinical trial. Tom will then review our second quarter financial results, and we will conclude with a question and answer session.
Greg Divis: Thank you, Austin. Good morning, everyone, and thank you for joining us for this quarterly update.
Speaker Change: Following my opening remarks, Richard will provide an update on our launch progress. Jennifer will walk through our Phase 3 idiopathic hypersomnia, or IH, clinical trial.
Speaker Change: Tom will then review our second quarter financial results, and we will conclude with a question and answer session.
Gregory Divis: The second quarter marked the one-year anniversary of introducing LoomRise to the market, and I'm immensely proud of the work done by our team and the impact we have made within the narcolepsy community. From the start, we recognized that OxyBate-eligible patients deserve a once-at-bedtime treatment that addresses their needs where first-generation oxidates fall short. Our team's relentless determination to serve people with narcolepsy has been the driving force behind our tremendous progress. Since launch last year, we have seen our pre-approval market insights materialize in real time, which, when combined with the strong foundation we have built, only reinforces our confidence in the significant opportunity that Loom Rights offers in our pursuit of its potential billion-dollar-plus opportunity. Specifically, we point out the following.
Speaker Change: The second quarter marked the one-year anniversary of introducing Loom Rise to the market, and I'm immensely proud of the work done by our team and the impact we have made within the narcolepsy community.
Speaker Change: From the start, we recognize that Oxybate-eligible patients deserve a once-at-bedtime treatment option that addresses their needs where first-generation Oxybates fall short.
Speaker Change: Our team's relentless determination in serving people with narcolepsy has been the driving force behind our tremendous progress.
Speaker Change: Since launch last year, we have seen our pre-approval market insights materialize in real time.
Speaker Change: which when combined with the strong foundation we have built only reinforces our confidence in the significant opportunity that loom rights offers in our pursuit of its potential billion dollar plus opportunity
Gregory Divis: We have seen consistent, strong uptake from patients switching from the twice-nightly, first-generation Oxybate products, the majority coming from the mixed salts formulation. Demand is growing from both nave patients and patients who have previously tried and discontinued twice-nightly oxygen. In the patient segment, many patients had discounts.
Speaker Change: Specifically, we point to the following.
Speaker Change: we have seen consistent strong update from patients switching from the twice netwe first generation oxy products the majority coming from the mix salt formulations
Speaker Change: demand is growing from both nin patients and patients who have previously tried and discontinued twice nightlelioxidates a patient segment many had discount
Gregory Divis: And the launch of LUMRIKE has resulted in the expansion of new Oxybate prescribers, who had previously never written an Oxybate script, and additionally, physicians who are now treating more patients with Oxybate, specifically with Loom Rise than prior to our launch, resulting in new patients coming into the OxyBate market that prior to Lumrise were not accessible or potentially intrusive. These important data points only confirm what our research informed us, that the oxybate market opportunity for loom risers is both significantly larger than that of the first generation oxybates and is unique, unique primarily to loom riser loans.
Speaker Change: And the launch of Lumrise has resulted in the expansion of new Oxybate prescribers who had previously never written an Oxybate script, and additionally, physicians who are now treating more patients with Oxybates, specifically with Lumrise, than prior to our launch.
Speaker Change: resulting in new patients coming into the oxupbate market that prior to loumrise were notaccessible or potentially interested
Speaker Change: These important data points only confirm what our research informed us, that the oxybate market opportunity for LoomRise is both significantly larger than that of the first-generation oxybates and is unique primarily to LoomRise alone.
Gregory Divis: With that, we are pleased to report that there were more than 1,900 patients on therapy at June 30th, and we generated $41.5 million in net revenue during the second quarter of 2020. Additionally, as Tom will cover during his review, based upon how we exited Q2, we currently expect that we will generate operating income in Q3, an important financial milestone we will have achieved during the first full calendar year of launch. As announced last week, we dosed our first patient in our Phase 3 Revitalize trial, evaluating Lumerizer's potential benefit in the adult IH population based on feedback from physicians and experts in the field.
Speaker Change: With that, we are pleased to report that there were more than 1,900 patients on therapy at June 30th, and we generated $41.5 million in net revenue during the second quarter of 2024.
Tom: additionally as tom will cover during his review based upon how we exitited q two we currently expect that we will generate operating income in q three and important financial milestone we will have achieved during the first will calendar year launch
Speaker Change: As announced last week, we dosed our first patient in our Phase 3 revitalized trial, evaluating Lumerizer's potential benefit in the adult IH population.
Gregory Divis: We believe Lumite has strong potential to improve care for those living with IH through its unique extended release formulation. In addition, we are expecting a potential approval decision by the FDA for our supplemental new drug application for Lumerize's use in the pediatric narcolepsy population. The target action date is set for September 7th. If approved, we believe LUMRISE has the potential to address the needs of both pediatric narcolepsy patients who could benefit from a full therapeutic dose of inoxibate given in a once-at-bedtime formulation and caregivers who currently have to awaken in the middle of the night, night after night, to administer a second dose of first-generation Oxibate to their children.
Speaker Change: based on feedback from physicians and extrperts in the field we believe lumomis has strong potential to improve care for those living without h through which unique extended release formulation
Speaker Change: In addition, we are expecting a potential approval decision by the FDA for our supplemental new drug application for Lumerize's use in the pediatric narcolepsy population.
Speaker Change: the target actiondate is set for september seventh
Speaker Change: If approved, we believe LUMRISE has the potential to address the needs of both pediatric narcolepsy patients who could benefit from a full therapeutic dose of inoxibate given in a once-at-bedtime formulation.
Speaker Change: and the caregivers who currently have to awaken in the middle of the night, night after night, to administer a second dose of a first-generation Oxibate to their children.
Gregory Divis: Lastly, we continue our development work on a potential no or low sodium once-at-bedtime oxidate formulation, with a target profile that is bioequivalent to lumen. As previously stated, we expect to have an update by the end of 2024. In summary, after one year of launch and with an eye on the future, we believe LoomRise is well positioned in its pursuit to become the preferred octobase among patients and providers as we continue to positively impact the multi-billion dollar octavate market opportunity. I'll now turn the call over to Richard for details on our commercial developments. Richard.
Speaker Change: Lastly, we continue our development work on a potential no or low sodium, once-at-bedtime
Speaker Change: with a target profile that is by equivalent todeliumverance
Speaker Change: As previously stated, we expect to have an update by the end of 2024.
Speaker Change: In summary, after one year of launch and with an eye on the future, we believe LoomRise is well positioned in its pursuit to become the preferred Oxibate among patients and providers as we continue to positively impact the multi-billion dollar Oxibate market opportunity.
Speaker Change: I'll now turn the call over to Richard for details on our commercial developments. Richard. Thank you, and good morning everyone. As Greg mentioned, it's hard to believe that we have one year of launch behind us, and what a year it's been.
Richard Kim: Thank you and good morning everyone. As Greg mentioned, it's hard to believe that we have one year of launch behind us. And what a year it's been. It has been amazing to witness Blumerise's transformative impact among people with narcolepsy, their families, and health care providers. Let me start with our new key patient metrics. As of the end of Q2, we had more than 1,900 patients on therapy. Additionally, for our leading indicators that we have provided quarterly since launch through June 30th, approximately 3,800 patients were enrolled in our Rise Up Patient Support Program, and more than 2,400 total patients had initiated therapy.
Richard: it has been amazing to witness newizes transformed the impact among people with ourclepsy their families and healthcare providers
Richard: Let me start with our new key patient metrics. As of the end of Q2, there were more than 1,900 patients on therapy.
Speaker Change: Additionally, for our leading indicators that we have provided quarterly since launch through June 30th, approximately 3,800 patients were enrolled in our Rise Up patient support program and more than 2,400 total patients had initiated therapy.
Richard Kim: With our second-quarter numbers, you can see that we have continued the momentum with our launch and that there has been no slowdown in quarter-over-quarter patient demand for LUMAR. Now, let's look at our patient dynamics. We continue to have strong representation across our three patient segments, including those switching from or previously discontinued white nightly octobates and those new to octobates. As expected at this stage, switch patients still make up a significant portion of patients on LUMRI.
Speaker Change: With our second quarter numbers, you can see that we have continued the momentum with our launch and that there has been no slowdown in quarter-over-quarter patient demand for LumenRest.
Speaker Change: now letlook at our patient dynamics we continue to have strong representation across our three patient segments
Speaker Change: including those switching from or previously discontinued twice nightly octobates and those new to octobates.
Speaker Change: As expected at this stage, switch patients still make up a significant portion of patients on LymeRyse.
Richard Kim: At the same time, it's been especially encouraging to see more new-to-Oxford patients being prescribed this. Now, this, in addition to lumerides, is used in previously discontinued, twice-nightly oxibate patients, along with new writers for lumerides who have previously never prescribed an oxibate. Our important data points, validating our market research, that lumerides can grow the oxibate market beyond its size from when it was just a first-generation oxibate. Now, our data continues to indicate there are more than 4,500 HTPs who make up the current oxalate-prescribing universe. Importantly, from these HTPs, almost 500 make up 50% of the total Oxybate prescription volume, and 85% of that group has written for Loom Rack.
Speaker Change: at the same time it's been especially encouraging to see more new to oxy patients being prescribedbly advice
Speaker Change: Now our data continues to indicate there are more than 4500, ACP, who make up the current octavate prescribing universe.
Speaker Change: Importantly from these hcp's almost 500 make up 50% of the total octavate prescription volume and to date.
Speaker Change: 85% of that group have written further remarks.
Richard Kim: We are pleased with our continued capture of high-volume osteobate prescribers, as they represent a core component of our launch strategy. Transitioning to product fulfillment, our overall pull-through process continues to deliver, with over 700 new patient starts in the second quarter. These results are attributable to a number of factors, including robust pair coverage.
Speaker Change: We are pleased with our continued capture of high volume Octavate prescribers as they represent a core component of our launch strategy.
Speaker Change: Transitioning to product fulfillment or overall pull through process continues to deliver with over 700, new patient starts in the second quarter.
Speaker Change: These results are attributable to a number of factors, including robust payor coverage.
Speaker Change: Strong execution, good reimbursement and rise up teams.
Speaker Change: Along with ACP is continuing to gain clinical experience prescribing <unk>.
Richard Kim: Strong execution for our field reimbursement and the Rise Up team, along with ACPs, continue to gain clinical experience prescribing Lumar. Looking to the second half of the year, we have built a strong foundation we believe will support Lumerize's ongoing uptake in the Narcissus community. In particular, demand for Lumaris continues to be strong, and our fulfillment systems are working to get patients initiated efficiently. Paired with early signs that the Oxabate market is growing, we remain highly confident in our belief that LumeRyze is on track to become the preferred Oxabate in the Narcopsy market. And now, I will turn the call over to Jen to discuss the recent dosing of the first patient in our Phase III IH study.
Speaker Change: Looking to the second half of the year, we have built a strong foundation, we believe will support new writers ongoing uptake in the market of acuity.
Speaker Change: In particular demand for <unk> continues to be strong.
Speaker Change: And our fulfillment systems are working to get patients initiate it efficiently.
Speaker Change: Paired with early signs that the oxalate market is growing we remain highly confident in our belief that <unk> is on track to become the preferred ox debate in our subsea market.
Speaker Change: And now I will turn the call over to Jim to discuss the recent dosing the first patient in our phase III study.
Jennifer Goodman: Thank you, Richard. Since the introduction of Loom Rise, we have heard from patients and providers repeatedly about the transformative relief Loom Rise has brought to their lives. Loom Rise has not only provided patients with the opportunity for an uninterrupted night's sleep, but we also often hear about what they characterize as a restored ability to live their lives on their own terms. While we have been serving the narcolepsy community for more than a year with Lumarize, people living with IH have been severely constrained by a lack of approved treatment.
Jim: Thank you Richard since the introduction of new mice, we had heard from patients and providers repeatedly about between formative relief reminds me brought to their lives newmar.
Jim: <unk> is not only providing patients with the opportunity for an uninterrupted night's sleep, but we also often hear about what eight characterized as a restored ability to live their life on their own terms.
Speaker Change: While we have been learning the narcolepsy community for more than a year with many mines keep a living with IHS had been severely constrained in a lack of increased treatment.
Jennifer Goodman: In April, an externally-led, patient-focused drug development meeting was held with the FDA and Sleep Consortium to inform patient needs for IH treatment. Among more than 800 individuals living with IH, nearly two-thirds of respondents stated that their IH symptoms were not controlled or were poorly controlled. Patient testimonials underscored the need for additional therapeutics.
Speaker Change: In April and externally Lad patient focused drug development meeting withheld with the FDA and sweet consortium to inform patient needs for <unk> treatment.
Speaker Change: Among more than 800 individuals living with IH nearly two thirds of respondents stated that their IH symptoms were not control quarterly controlled pay.
Speaker Change: Patient testimonials underscored the need for additional therapeutics.
Jennifer Goodman: Physicians and patients have been vocal in their demand to see Lumrise evaluated for IH due to the deep sleep inertia associated with IH, and we are now answering their call. We are excited to have recently dosed the first patient in our clinical trial evaluating Lumenis for IH as it is the first step to potentially bringing this important therapy to patients. Our study, known as REVITALIZE, is a double-blind, placebo-controlled, randomized-withdrawal, multi-center Phase III study to evaluate the efficacy and safety of Lumirines as a once-nightly dose in IH patients.
Speaker Change: Physicians and patients have been vocal in their demand to see numerous evaluated for IH due to the deep sleep inertia associated with I H and we are now entering their call.
Speaker Change: We are excited to have recently dosed the first patient in our clinical trial evaluating the bias for IAA as it in the first step to potentially bringing this important therapy to patients.
Speaker Change: Our study known as revitalized is a double blind placebo controlled randomized withdrawal multi center phase III study to evaluate the efficacy and safety of new mines as a once nightly dose NIH patients.
Jennifer Goodman: Enrollment of approximately 150 participants will include both those switching from first-generation immediate-release oxidase, as well as those not on oxidase therapy at baseline. Our primary efficacy endpoint is to demonstrate a change in the Upward Sweeping Scale score, which is administered at Week 14 after a two-week double-blind randomized withdrawal period. Our key secondary endpoints are the patient global impression of change and the idiopathic hypersomnia severity scale, which is a validated multi-domain assessment of key IH symptoms.
Speaker Change: Enrollment of approximately 180 participants will include both those switching from first generation immediate release Aqua base as well as there is not an activate therapy at baseline.
Speaker Change: The primary efficacy endpoint is to demonstrate a change in the Epworth sleepiness scale score, which is administered at week 14. After a two week double blind randomized withdrawal period.
Speaker Change: Our key secondary endpoint or the patient global impression of change and the idiopathic hypersomnia severity scale, which is a validated multi domain assessment of key IH symptoms.
Jennifer Goodman: The primary efficacy analysis will occur after the 14 week portion of Revitalize is completed, and the study will be followed by an open label extension. Initiating Revitalize is a key milestone for Avadel and, most importantly, for the IH patient and medical community. We have seen the positive impact that Lumite has had on narcolepsy and are working diligently toward expansion in IH. I'll turn the call over to Tom for a review of our financial results.
Speaker Change: The primary efficacy analysis will occur after that 14 week portion of revitalized is completed and the study will be followed by an open label extension.
Speaker Change: Initiating revitalized is a key milestone for ABA down and most importantly for the IH patient and medical community. We have seen the positive impact that we might have had on narcolepsy and are working diligently toward expansion NIH.
Jim: I'll turn the call over to Tom for a review of our financial results.
Thomas McHugh: Before I begin, please note that full financial results are available in the press release issued this morning and the 10-Q. I will also be reviewing non-GAAP financial results, which can be found on our investor relations website at investors.avadel.com. I'll start with our top line results.
Tom: Thank you Jen <unk>.
Tom: Before I begin. Please note that full financial results are available in the press release issued this morning and the 10-Q.
Tom: I'll also be reviewing non-GAAP financial results, which can be found on our investor relations website at investors Dot <unk> Dot com.
Thomas McHugh: In the quarter ended June 30th, 2024, we reported net revenue of $41.5 million and gross profit of $38.7 million, both of which represent a greater than 50% increase from the quarter ended March 31st, 2024. The increase in net revenue was driven primarily by continued strong patient demand for Lumeron. Additionally, we estimate that there was about four weeks of inventory in the channel at the end of June versus approximately three weeks at March 31st.
Tom: I'll start with our top line results.
Tom: In the quarter ended June 32024, we reported net revenue of $41 5 million and gross profit of $38 7 million, both of which represent a greater than 50% increase from the quarter ended March 31 2024.
Tom: The increase in net revenue was driven primarily by continued strong patient demand for <unk>.
Tom: Additionally.
Tom: We estimate that there was about four weeks of inventory in the channel at the end of June.
Tom: Versus approximately three weeks at March 31.
Thomas McHugh: Turning to operating expenses, we reported $51.5 million of GAAP operating expenses for the second quarter, which included a non-recurring expense of $5 million related to the previously announced mandatory exchange of the company's American Depository shares and termination of the American Depository Receipt Program. As a result of the mandatory exchange, Avadel was added to the Russell 3000 Index at the beginning of July.
Tom: Turning to operating expenses, we reported $51 5 million of GAAP operating expenses for the second quarter, which includes a nonrecurring expense of $5 million related to the previously announced mandatory exchange the company's American depository shares and termination of the American depository receipt.
Tom: Program.
Tom: As a result of the mandatory exchange Avondale was added to the Russell 3000 index at the beginning of July.
Thomas McHugh: The second quarter also included $6.5 million of non-cash charges comprised of stock-based compensation of $5.5 million and depreciation and amortization of $1 million. After adjusting for these items, which total $11.5 million. The remaining cash operating expenses were approximately $40 million. We expect that for the remainder of 2024, recurring quarterly cash operating expenses will be in the range of $40 to $45 million, and non-cash operating expenses will be in the range of $5 to $7 million.
Tom: The second quarter also included $6 5 million of noncash charges comprised of stock based compensation of $5 5 million and depreciation and amortization of $1 million.
Tom: After adjusting for these items, which totaled $11 5 million.
Tom: <unk> cash operating expenses were approximately $40 million.
Tom: We expect that for the remainder of 2024 recurring quarterly cash operating expenses will be in the range of 40% to 45 million in noncash operating expenses will be in the range of $5 million to $7 million.
Thomas McHugh: With respect to the balance sheet, we had $71.4 million of cash, cash equivalents, and marketable securities as of June 30. The use of cash during the second quarter included $5 million of expense related to the termination of the American Depository Receipt Program.
Tom: With respect to the balance sheet, we had $71 4 million of cash cash equivalents and marketable securities as of June 30.
Tom: The use of cash during the second quarter included the $5 million of expense related to the termination of the American depositary receipt programs.
Thomas McHugh: I'll finish my remarks with a few comments regarding our expectations for the remainder of 2024. We continue to pay close attention to the sell-side estimates, and at this time, we are comfortable with the current revenue consensus of approximately $168 million for the full year, including the possibility that it could be higher if actual results, such as the rate of increase in reimbursed patients, the total number of reimbursed patients who are treated with Lumiride, and NetPricing outperform the assumptions currently used by the sell-side industry.
Tom: I'll finish my remarks, with a few comments regarding our expectations for the remainder of 2024.
Tom: We continue to pay close attention to the sell side estimates and at this time, we are comfortable with the current revenue consensus of approximately $168 million for the full year, including the possibility that it could be higher if actual results such as the rate of increase in reimbursed patients.
Tom: The total number of reimbursed patients were treated with numerous and net pricing outperformed the assumptions currently used by the sell side analysts.
Thomas McHugh: Lastly, with respect to our timeline to reaching breakeven, we were very close to achieving this during the second quarter when comparing $38.7 million of gross profit to approximately $40 million of recurring cash operating expenses, which resulted in an adjusted operating loss of approximately $1.2 million. Based on our current plans and assumptions, we expect that adjusted operating income will be positive beginning in the third quarter and continue to be positive for the remainder of 2024.
Tom: Lastly, with respect to our timeline to reaching breakeven we were very close to achieving this during the second quarter when comparing $38 7 million of gross profit to approximately $40 million of recurring cash operating expenses, which resulted in an adjusted operating loss of approximately $1 2 million.
Tom: Based on our current plans and assumptions, we expect that adjusted operating income will be positive beginning in the third quarter and continued to be positive for the remainder of 2024.
Thomas McHugh: Our expectations regarding adjusted operating income are based on a number of factors, including the number of reimbursed patients on LoomRise, the net pricing of LoomRise, and recurring cash operating expenses. And with that, I will turn the call back to Greg for closing remarks. Thank you, Tom.
Speaker Change: Our expectations regarding adjusted operating income are based on a number of factors, including the number of reimbursed patients on numerous net pricing of <unk> and recurring cash operating expenses and with that I will turn the call back to Gregg for closing remarks.
Gregory Divis: Before we wrap up, I want to take a moment to comment on our publicly reported launch message and what to expect moving forward. This quarter, we added a new metric, the total number of patients on therapy. With a full year of launch now behind us, going forward, we intend to report only this patient metric, and, of course, revenue, as we believe these two metrics are the most important as our launch matures.
Gregg: Thank you Tom.
Gregg: Before we wrap up I want to take a moment to comment on our publicly reported launch metrics and what to expect moving forward.
Operator: Williams Call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. As a reminder, this conference is being recorded.
Gregg: This quarter, we added a new metric the total number of patients on therapy.
Gregg: For the full year of launch now behind Us going forward, we intend to report only this patient metric and of course revenue as we believe these two metrics are the most important as our launch matures.
Austin Murtagh: It is now my pleasure to introduce Austin Murtagh with Precision AQ. Thank you. You may begin.
Gregory Divis: Good morning, and thank you for joining us on our conference call to discuss Avadel's second quarter 2024 results. As a reminder, before we begin, the following presentation includes several matters that constitute forward-looking statements within the meaning of the Private Security Litigation Reform Act of 1995. Forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those contemplated in such forward-looking statements.
Gregory Divis: We believe we are well positioned to execute our business priorities, including the ongoing launch of LoomRise and our lifecycle management opportunities, both of which are focused on our primary business objective, maximizing the full value of Loomis. So, in conclusion, we're very pleased with our progress and our growth thus far, recognizing that we have much more to accomplish. We thank you for your support and look forward to providing future updates on our progress. And with that, we will open the call for questions.
Speaker Change: We believe we are well positioned to execute our business priorities, including our ongoing launch of <unk> and our lifecycle management opportunities.
Speaker Change: Both of which are focused on our primary business objective maximizing the full value of bloomers.
Tom: So in conclusion, we're very pleased with our progress and our growth thus far recognizing that we have much more to accomplish.
Tom: We thank you for your support and look forward to providing future updates on our progress.
Speaker Change: And with that we will open the call for questions operator.
Gregory Divis: These risks and uncertainties are described in Avadel's Public Filing under the Exchange Act, included in the form 10K for the year-end of December 31st of 2023, which was filed on February 23rd, February 29th, 2024, and subsequent SEC violence. Except as required by law, Avadel undertakes no obligation to update or revise any forward-looking statements contained in this presentation to reflect new information, future events, or otherwise.
Operator: Thank you. At this time, we will conduct the question and answer session. As a reminder, to ask a question, you will need to press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. Please stand by while we compile the Q&A list. Our first question comes from the line of Andrew Tsai of Jefferies. Your line is now open.
Speaker Change: Thank you at this time, we will conduct a question and answer session. As a reminder to ask a question you will need to press star one on your telephone and wait for your name to be announced to withdraw your question. Please press star one again.
Speaker Change: Please standby, while we compile the Q&A roster.
Speaker Change: Okay.
Speaker Change: Okay.
Speaker Change: Our first question comes from the line of Andrew Tsai of Jefferies. Your line is now open.
Austin Murtagh: On the call today are Greg Divis, Chief Executive Officer, Richard Kim, Chief Commercial Officer, Dr. Jennifer Gudeman, Senior Vice President of Medical and Clinical Affairs, and Tom McEw, Chief Financial Officer. At this time, I'll turn the call over to Greg. Thank you, Austin.
Andrew Tsai: Hey, good morning. Congratulations on the strong launch. And I appreciate you sharing the metrics. Thanks for taking our questions.
Andrew Tsai: Hi, good morning, Congrats on the strong launch.
Andrew Tsai: Appreciate you sharing the metrics. Thanks for taking my question. So the first one is if we were to take another look.
Speaker Change: Data cut as of July or even early August out as the slope of uptake luck so far.
Gregory Divis: Good morning, everyone, and thank you for joining us for this quarterly update. Following my opening remarks, Richard will provide an update on our launch progress. Jennifer will walk through our Phase III idiopathic hypersomnia, or IAIDS clinical trial. Tom will then review our second quarter financial results, and we will conclude with a question-and-answer session. The second quarter marked the one-year anniversary of introducing luminaries to the market, and I'm immensely proud of the work done by our team and the impact we have made within the Narcolepsy community.
Speaker Change: Be factoring in some kind of summer seasonality due to holidays vacations this quarter or.
Speaker Change: Should we expect slope of patient additions and so forth to remain unchanged or even increase this quarter.
Andrew Tsai: Thanks, Andrew.
Speaker Change: We would qualitatively characterize it as our trends remain consistent as we've seen to date. This is our first summer that we've been in the marketplace, so whether their seasonality or not we'll have a chance to assess that for whom price specifically.
Gregory Divis: So the first one is, if we were to take another look, data cut as of July or even early August, how does the slope of uptake look so far? Should we be factoring in some kind of summer seasonality due to holiday vacations this quarter? Or should we expect the slope of patient additions and so forth to remain unchanged or even increase this quarter? Thanks.
Gregory Divis: From the start, we recognize that Oxidate eligible patients deserve a once-at-bedtime treatment option that addresses their needs where first-generation oxidates fall short. Our team's relentless determination in serving people with narcolepsy has been the driving force behind our tremendous progress. Since launch last year, we have seen our pre-approval market insights materialized in real-time, which when combined with the strong foundation we have built only reinforces our confidence in the significant opportunity that moonlight offers in our pursuit of its potential billion-dollar-plus opportunity.
Speaker Change: As we get through the period, but at this point I think we would describe it as continuing to be consistent with what we've seen.
Gregory Divis: Great. And then secondly, speaking of just the slope being consistent, you know, pediatric could be approved a month from now. So that's 5% of the current Oxbate users. So is it fair to assume there could be a nice little bolus coming from that approval, or could the uptake in this population be slower than we're thinking? Yeah, I think so.
Gregory Divis: Thanks, Andrew. I think we would qualitatively characterize it as, you know, our trends remain consistent as we've seen to date. This is our first summer that we've been in the marketplace. So, you know, whether there's seasonality or not, we'll have a chance to assess that for loom rise specifically as we get through the period. But at this point, I think we would describe it as continuing to be consistent as to what we've seen.
Speaker Change: Great and then secondly speaking of just the slope being consistent.
Speaker Change: Pediatric could be approved.
Speaker Change: In a month from now so.
Speaker Change: That's 5% of the current oxide users. So is it fair to assume there could be a nice little bolt bolus coming from that approval or could.
Speaker Change: The uptake in the sub population would be slower than what we're thinking.
Gregory Divis: Yeah, I think, as we think about it, it's an important addition to our label because we hear quite a lot from parents who wake up in the middle of the night, night after night. But again, it's a relatively small patient population. So I think over time, we have an opportunity to both convert patients, as well as potentially even expand the use in the pediatric market over time, based upon some of our insights. I think if we think about the balance of 2024, it's modestly or marginally incremental at this point. But you know, in the longer term, we think it's really important.
Speaker Change: Thanks.
Speaker Change: Yes, I think as we think about it it's an important.
Gregory Divis: Specifically, we point to the following. We have seen consistent, strong uptake from patients switching from the twice-nightly first-generation Oxidate products, the majority coming from the mix salts formulation. The man is growing from both naive patients and patients who have previously tried and discontinued twice-nightly oxidates, a patient segment many had discounts. And the launch of moonlight has resulted in the expansion of new Oxidate prescribers, who have previously never written an oxidate script and additionally positioned to are now treating more patients with oxidates, specifically with moonlight than prior to our launch.
Speaker Change: Addition to our label because we hear quite a lot from parents, who wake up in the mid overnight night. After night again, it's a relatively small patient population. So I think over time, we have an opportunity to both convert patients as well as potentially even expand the use in the pediatric market over time based upon some of our <unk>.
Speaker Change: Insights I think as we think about the balance of 2024.
Speaker Change: It's modestly a marginally incremental at this point, but longer term, we think it's really important.
Speaker Change: Great. Thank you so much.
Speaker Change: Thank you.
Francois Brisebois: Our next question comes from the line of Francois Brisebois of Oppenheimer. Your line is now open.
Gregory Divis: Arche, resulting in new patients coming into the Oxidate Market that prior to Lume Rise were not accessible or potentially interested. These important data points only confirm what our research informed us that the Oxidate Market Opportunity for Lume Rise is both significantly larger than that of the first-generation oxidates and is unique primarily to Lume Rise alone. With that, we are pleased to report that there were more than 1900 patients on therapy at June 30th.
Speaker Change: Our next question comes from the line of friends Swab Crystal ball of Oppenheimer. Your line is now open.
Francois Brisebois: Hi, thanks for taking the questions. I was just wondering, in terms of reimbursement, where we stand now and just the impact there of if you kind of cut it as revenue per patient, and obviously appreciate the new metric and the look back at that new metric and what it means, but if we're thinking about revenue per patient, is there any impact expected from reimbursement here in the second half?
Speaker Change: Alright, Thanks for taking my questions I just.
Speaker Change: I'm wondering in terms of reimbursement, where we stand now and just the the impact there if you kind of cut it as revenue per patient and obviously I appreciate the new metric and look back at that new metric and what it meant but if we're thinking about revenue per patient.
Gregory Divis: And we just generated $41.5 million in net revenue during the second quarter of 2024. Additionally, as Tom will cover during his review, based upon how we exited Q2, we currently expect that we will generate operating income in Q3 and important financial milestone we will have achieved during the first full calendar year of launch.
Speaker Change: Any impact expected from reimbursement here in the second half.
Richard Kim: So maybe Richard you can cover reimbursement and some kind of value per patient.
Richard: Maybe Richard you can cover reimbursement and Tom kind of value per patient.
Thomas McHugh: Thanks for the question. Yeah, we're super pleased with how our market access team has performed. To date, we have about 85% of commercially covered lives where a lumarized policy exists, so it's been really strong, which has really helped to drive us being able to get patients initiated. So, Tom, do you want to sort of take the revenue per patient? Yeah.
Richard: Yeah, Hey, thanks for the question, Yes, we're super pleased with how our market access team has performed to date, we have about 85% of commercially covered lives, we're arguing right off the exist. So it's been a really strong which has really helped to drive us being able to get patients initiated so amit.
Gregory Divis: As announced last week, we dozed our first patient in our Phase III Revitalized Trial, evaluating Lume Rise's potential benefit in the adult IEA's population. Based on feedback from physicians and experts in the field, we believe Lume Rise has strong potential to improve care for those living with IEA through its unique extended release formulation. In addition, we are expecting a potential approval decision by the FDA for our supplemental new drug application for Lume Rise's use in the pediatric narcolepsy population.
Thomas McHugh: Yeah, so thanks Frank. The revenue per patient, you know, last quarter, we had talked about exiting the quarter at about $120,000. We've seen some improvement in that net pricing heading into Q2. Let's say it's natural to some extent because Q1 is pretty heavily impacted by gross net adjustment. So we're, you know, we do see some improvement in Q2. I think the only other comment I would add regarding reimbursement is that the other segment of our business, which represents, you know, 15 to 20 percent of enrollments, is really non-commercial, predominantly Medicare and Medicaid.
Richard: The revenue per patient yes.
Frank: Yes, Thanks Frank.
Frank: The revenue per patient.
Frank: Last quarter, we had talked about exiting the quarter at about 120000.
Speaker Change: Per reimbursed patient, we've seen some improvement in that.
Speaker Change: Pricing heading into Q2, let's say, it's natural to some extent because Q1 is pretty heavily impacted by gross to net adjustments.
Speaker Change: So we're we do see some improvement in Q2, I think the only other comment I would add regarding reimbursement is that the other segment of our of our business which represents.
Gregory Divis: The target action date is set for September 7th. If approved, we believe Lume Rise has the potential to address the needs of both pediatric narcolepsy patients who could benefit from a full therapeutic dose of an oxidate given in a once-at-bed time formulation. And the caregivers who currently have to awaken in the middle of the night, night after night, to administer a second dose of a first-generation oxidate to their children.
Gregory Divis: Lastly, we continue our development work on a potential nor a low sodium once-at-bed time oxidate formulation with a target profile that is bi-weekly equivalent to Lume Rise.
Speaker Change: 15% to 20% enrollment.
Speaker Change: Enrollments are really non commercial predominantly Medicare and Medicaid and as.
Thomas McHugh: And as we get into 2025, where a lot of those decisions will be made for Loom Rise, which we weren't eligible for in 2024, especially for Medicare, we'll get a better sense of how our coverage evolves beyond commercial coverage as we roll closer to the end of this calendar year.
Speaker Change: As we get into 2025, where a lot of those decisions will be made to realize which we weren't eligible in 2020 for especially for Medicare we will get a better sense of how our coverage evolves beyond the commercial coverage as we as we roll closer to the end of this calendar year.
Francois Brisebois: And then maybe just lastly, in terms of new prescribers to Oxybate that weren't prescribers before the 4,000 or greater than 4,500, I know it's concentrated, but did you guys approach these docs? Is this surprising that these docs who never prescribed Oxybates for over 20 years, you know, have started based on the once nightly? Is it just more awareness? Where do these doctors come from?
Speaker Change: Thank you and then maybe just lastly in.
Speaker Change: In terms of new prescribers to Oxford that Werent prescribers before that 4000 are greater than 4500, I know, it's concentrated but did you guys approach. These days is it surprising that these docs, who never prescribed OXXO Bates for over 20 years.
Gregory Divis: As previously stated, we expect to have an update by the end of 2024.
Speaker Change: We have started based on the once nightly is there's just more awareness where do these dots come from.
Richard Kim: Richard. Thanks, Frank.
Speaker Change: Richard.
Frank: Thanks, Frank so for.
Speaker Change: For the vast majority of those providers, we have not called on them. So I think this really speaks to that are really tremendous value proposition that BMI springs.
Richard Kim: So for the vast majority of those providers, we have not called on them. So I think this really speaks to the really tremendous value proposition that Lumerize brings. And in our pre-launch market research, when we tested our profile with high-use narcotic prescribers who don't use Oxybate, half of them said that with the profile of Lumerize, they would want to prescribe Lumerize compared to what they haven't done with the first generation Oxybate. So we think it's a really positive sign and something for us to build upon going forward.
Gregory Divis: In summary, after one year of launch, and with an eye on the future, we believe Lume Rise is well positioned in its pursuit to become the preferred oxidate among patients and providers as we continue to positively impact the multi-billion dollar oxidate market opportunity.
Speaker Change: And our prelaunch market research when we tested our profile with a high use narcolepsy prescribers, who don't use ox debate.
Richard Kim: I'll now turn the call over to Richard for details on our commercial developments. Richard. Thank you, and good morning, everyone. As Greg mentioned, it's hard to believe that we have one year of launch behind us. And what a year has been. It has been amazing to witness Lume Rise's transformative impact among people with narcolepsy, their families, and health care providers.
Speaker Change: The fed with the profile there might they would want to prescribe the right compared to what they havent done with the first generation oxo base. So we think it's a really positive sign and something for us to build upon going forward, yes, I'll just add to Richard's comment is that it's really interesting to us that we're getting demand without any really true efforts on our part directly.
Richard Kim: Let me start with our new key piece of metrics. As of the end of Q2, there were more than 1,900 patients on therapy. Additionally, for our leading indicators that we have provided quarterly since launch through student 30th, approximately 30 hundred patients were enrolled in our Rise Up patient support program. And more than 2,400 total patients had initiated therapy. With our second quarter numbers, you can see that we have continued the momentum with our launch and that there has been no slowdown in quarter over quarter patient demand for Lume Rise.
Gregory Divis: Yeah, I'll just add to Richard's comments that it's really interesting to us that we're getting demand without any really true effort on our part directly in terms of promotion, so it's something we're evaluating to see if there's some more we can do there for sure.
Speaker Change: In terms of promotions. So it's something we're evaluating to see if it's there is some more we can do that for sure.
Francois Brisebois: Great, thank you, and congrats again.
Speaker Change: Great. Thank you and congrats again.
Speaker Change: Thank you.
Ami Fadia: Our next question comes from the line of Ami Fadia of Needham & Company. Your line is now open.
Speaker Change: Our next question comes from the line of Amit <unk> of.
Amit <unk>: Needham <unk> company. Your line is now open.
Ami Fadia: Good morning. Thanks for taking my question. Um, can you give us a sense of what percent of patients that are currently on nomerize are from one of the other oxobates versus previously discontinued as well as never-known oxobate And then if you could give us any updates on pull-through at the payer level across the three GPOs that you have contracts with, perhaps any color on, you know, Humana or some of the other opt-in plans would be Thank you.
Amit <unk>: Hi, good morning, Thanks for taking my question.
Richard Kim: Aris. Now, look at our patient dynamics. We continue to have strong representation across our three patient segments, including those switching from or previously discontinued, quite slightly oxidates, and those new to oxidates. As expected at this stage, switch patients still make up a significant portion of patients on lemurice. At the same time, it's been especially encouraging to see more new to oxidative patients being prescribed lemurice. Now, this, in addition to lemurice, is used in previously discontinued twice nightly oxidative patients, along with new riders for lemurice, who have previously never prescribed an oxidative.
Amit <unk>: Can you give us a sense of what percent of patients that are currently on zoom right either.
Speaker Change: It came from one of the other oxidate versus previously discontinued and <unk> never known Octavate before any.
Amit <unk>:
Amit <unk>: And then if you could give us any update on pull through at the payer level.
Amit <unk>: Across the <unk> that you have contracts with.
Speaker Change: Perhaps any color on humana or some of the other option plan would be helpful. Thank you.
Richard Kim: Yeah, thanks for the question, Tommy. So as far as sort of like the percentage of switch versus never on an oxibate before, the biggest chunk of our patients that we have right now are still being sourced from switch patients from first generation oxibates, with the highest percentage of those being from the mixed cell overall as well. So what we are seeing at the same time, though, is that the new to oxibate patients are starting to increase their representation as well. And we really see that as a very positive sign where they sort of continue to support the value proposition of Blue Rhine.
Speaker Change: Sure. Thanks.
Amit <unk>: Thanks for the question Tommy so as far as sort of like a percentage of switch versus sort of never on an Oxford before.
Richard Kim: Our important data points, validating our market research that lemurice can grow the oxidative market beyond its size when it was just first generation oxidative. Now, our data content is indicated there are more than 4,500 ACPs who make up the current oxidative prescribing universe. Importantly, from these ACPs, almost 500 make up 50% of the total oxidative prescriptions volume, and today's 85% of that group have written for lemurice. We are pleased with our continued capture of high volume oxidative prescribers as they represent a core component of our launch strategy.
Speaker Change: Biggest chunk of our patients that we have right now are still being sourced from switch patients from first generation box debates with the highest percentage of those being from the mixed but overall as well. So what we are seeing at the same time, though is that the new to occupy patients are starting to increase the representation as well and we really see that as a very positive sign for these sort of continue to support the <unk>.
Richard Kim: So the biggest chunk is still switch patients, but we are starting to see a bit of an increase in the representation of new patients trying to oxibate. And as far as the GPO representation is concerned, I think, you know, traditionally, what we sort of see is the Zinc CVS slides, and the Ascent slides are the biggest chunk with Optum being smaller. And I think what we're seeing, in general, is the channels being representative of the size of those GPO contracts, with Zinc being the largest, Ascent being the second largest, and then the MSR Optum business being the smallest of the three. So pretty consistent with the sizing opportunity of those three contracts that we have.
Speaker Change: Proposition definitely right. So the biggest chunk of our stock, which patient, but we are starting to see a bit of an increase in the reputation of new patients.
Speaker Change: <unk>.
Speaker Change: And as far as the GPO representation is concerned I think traditionally what we sort of see as the b.
Richard Kim: Transitioning to product fulfillment, our overall pull through process continues deliver with over 700 new patients starts in the second quarter. These results are attributable to a number of factors including robust pair coverage, strong execution for our field reimbursement, and rise up teams, along with ACPs continuing to gain clinical experience prescribing lemurice.
Speaker Change: At zinc CBS <unk> and the <unk> satellites.
Speaker Change: By far the biggest chunk with often being smaller and I think what we're seeing in general is the channel as being representative of the size of those GPO contract with <unk> being the largest incentive being the second largest and then the MSR optum business being the smallest of the three so pretty consistent with the sizing opportunity of those three contracts that we have.
Richard Kim: Yeah, I think the only other comment I would add to that is that I think it's fair to say that, like, the significant majority of the lives underneath those GPO umbrellas have established policy coverage decisions now, not all of them, with regard to LUMAR. So I think, I think getting to your question, we've got policy coverage decisions in place, and they are pulled through those through the GPO.
Richard Kim: Looking to the second half of the year, we have built a strong foundation we believe will support lemurizes ongoing uptake in the narcotic community. In particular, demand for lemurice continues to be strong, and our fulfillment systems are working to get patients initiated efficiently. Pared with early science that the oxidative market is growing, we remain highly confident in our belief that lemurizes on track to become the preferred oxidative in the narcotic market.
Speaker Change: Yes, I think the only other comment I would add to that is that I think it's fair to say that.
Speaker Change: The significant majority of the lives underneath those GPO umbrella have established policy coverage decisions now not all of them with regards to with regards to a low mark. So I think I think getting to your question. We got policy coverage decision in place and pulled through those through the GPO contracts.
Ami Fadia: Okay, great. If I may ask one more question, can you just sort of walk us through or give us an update on the cadence of when you expect decisions in the ongoing IP cases and, specifically, the Jazz versus FDA case? Can you walk us through the upside and downside and how we should think about, you know, in a downside scenario, the ability to keep looming rise on the market should a decision go in favor of jazz? Thank you. Well, in terms of timing, I think...
Speaker Change: Okay, Great. If I may ask one more question can you just sort of walk us through or give us an update on the cadence of when you expect decisions from the ongoing IP cases, and specifically on the jazz with FDA Keith can you walk us through the.
Jennifer Gudeman: And now I will turn the call over to Jen to discuss the recent dosing of the first patients in our phase three IH study. Thank you, Richard. Since the introduction of lemurice, we have heard from patients and providers repeatedly about the transformative release, lemurice has brought to their lives.
Speaker Change: The upside downside and how we should think about in a downside scenario.
Speaker Change: To keep loan no more eyes on the market showed a decision going paperless Jonathan Thank you.
Jennifer Gudeman: Lemurice has not only provided patients with the opportunity for an uninterrupted night's sleep, but we also often hear about what they characterize as a restorability to live their lives on their own terms. While we have been serving the narcolepsy community for more than a year with lemurice, people living with IH have been severely constrained in a lack of accrued treatment. In April, an externally led patient-focused drug development meeting was held with the FDA in sleep consortium to inform patient needs for IH treatment.
Gregory Divis: Well, in terms of timing, I think it's our view that the next decision will likely come out of the APA case in D.C., followed by the patent case in Delaware. So when that is, we don't know, and they could come in a different order, I guess, but that's ultimately at the discretion of the judge from that perspective.
Speaker Change: Well in terms of timing I think it's our view that the next decision will likely come out of the case in D C.
Speaker Change: Followed by the patent case in Delaware.
Speaker Change: So when that is.
Speaker Change: Now they could come in a different order I guess, but that's ultimately at the discretion of the judge from that perspective, and we remain again, our position hasn't changed we're very confident in our in our views and even if a decision.
Gregory Divis: And again, our position hasn't changed. We're very confident in our views, and even if a decision were to unexpectedly go against us in that regard, we're prepared to take whatever steps necessary to ensure that Lumirase stays on the market to treat patients accordingly, and we believe that will be the case. But I'll close out again on the litigation matters by saying that we're highly confident in our position. And I'll remind all of our investors that, you know, there are other cases that are coming after this as well, including our antitrust case, which has been set for November of the next year, for which we're pursuing requisite damages for the unnecessary delay of Loomis' approval due to the inappropriate listed rents tax. But in terms of timing, it's really at the discretion of the judge, and we're prepared to act accordingly.
Speaker Change: Unexpectedly go.
Jennifer Gudeman: Among more than 800 individuals living with IH nearly two-thirds of respondents stated that their IH symptoms were not controlled or were poorly controlled. Payton Testimonials underscored the need for additional therapeutics. Physicians and patients have been vocal in their demand to see Lumeris evaluated for IH due to the deep sleep inertia associated with IH, and we are now answering their call.
Speaker Change: Against us in that regard.
Speaker Change: We're prepared to take whatever steps necessary to ensure that numerous phase on the market to be able to treat patients accordingly, and we believe that will be the case.
Speaker Change: But I'll close out again on the litigation matters that were highly confident in our position and I'll remind all of our investors that there's other cases that are coming after this as well, including our our antitrust case, which has been set for November of next year.
Jennifer Gudeman: We are excited to have recently dose the first patient in our clinical trial, evaluating Lumeris for IH as it is the first step to potentially bringing this important therapy to patients. Our study, known and revitalized, is a double blind placebo controlled randomized withdrawal, multi-center phase III study to evaluate the efficacy and safety of Lumeris as a once nightly dose in IH patients. Enrollment of approximately 150 participants will include both those switching from first generation immediate release oxybase, as well as those not on oxybate therapy at baseline.
Speaker Change: For which we are pursuing a requisite damages.
Speaker Change: For the unnecessary delay.
Speaker Change: Blue by room rates of approval due to the inappropriate listed randstad.
Jennifer Gudeman: Our primary efficacy endpoint is to demonstrate a change in the upward sweeping scale score, which is administered at week 14 after a two week double blind randomized withdrawal period. Our key secondary endpoint are the patient global impression of change in the idiopathic hypersomnia severity scale, which is a validated multi-domain assessment of key IH symptoms. The primary efficacy analysis will occur after the 14 week portion of revitalized is completed, and the study will be followed by an open label extension.
Speaker Change: In terms of timing, it's really at the discretion of the judge and we're prepared to act accordingly.
Speaker Change: Thank you.
Sarah: Thanks Sarah.
Sarah: Thank you.
David Amsellem: Our next question comes from the line of David Amsellem from Piper Sandler.
David <unk>: Our next question comes from the line of David <unk> Piper Sandler Your line is now open.
David Amsellem: Hey, thanks. Just a couple for me.
David: Hey, Thanks, just a couple for me I know youre going to have more updates on the low sodium product, but can you talk to.
Speaker Change: Generally the IP situation.
Speaker Change: John.
John: That formulation and your level of confidence that youre not going to run us out.
Speaker Change: Jazzes intellectual property surrounding their low sodium.
Speaker Change: Oxalate product so that's number one.
Speaker Change: And then number two is.
Speaker Change: Is it fair to say that with a bioequivalence pathway for that.
Speaker Change: Relatively rapid path to market for that formulation.
Speaker Change: And then lastly on IH are you thinking about that opportunity as something where you can expand the market.
Jennifer Gudeman: Initiating revitalized is a key milestone for Abedal, and most importantly for the IH patient in medical community. We have seen the positive impact that Lumeris has had on narcolepsy and are working diligently toward expansion in IH.
Speaker Change: Or do you see.
Speaker Change: Switching away from the highway to summarize in the <unk> setting or is it a little bit of both.
Gregory Divis: I know you're going to have more updates on the low-sodium product, but can you talk about, generally, the IP situation on that formulation and your level of confidence that you're not going to run afoul of JAS's intellectual property surrounding their low-sodium oxidase products? So that's number one. Then number two is, is it fair to say that with a bioequivalence pathway for that, there's a relatively rapid path to market for that formulation?
Thomas McHugh: I'll turn the call over to Tom for a review of our financial results. Thank you, Jen. Before I begin, please note that full financial results are available on the press release issue this morning and the 10Q. I will also be reviewing non-gap financial results, which can be found on our investor relations website at investors.avidal.com. I'll start with our top line results. In the quarter-ended June 30th of 2024, we reported net revenue of 41.5 million and gross profit of 38.7 million, both of which represent a greater than 50% increase from the quarter-ended March 31st, 2024.
Speaker Change: Thanks, David.
Speaker Change: Try to pick those off one at a time.
Speaker Change: Again, I think when it comes to our development strategy and our approach to a low or no sodium formulation, we have to understand whats in the patent landscape for sure and so we would be pursuing that.
Speaker Change: You should assume that that we're pursuing our direction accordingly.
Speaker Change: With that being considered.
Speaker Change: We had our development plan with a simple as just formulating something.
Speaker Change: Similar to what's in the market today, it would have already been done by now.
Speaker Change: That simple so again, we're very conscious of what the patent landscape is out there and and navigating inappropriate number two on your question about the development pathway using a bio equivalents.
Thomas McHugh: The increase in net revenue was driven primarily by continued strong patient demand for Lumeris. Additionally, we estimate that there was about four weeks of inventory in the channel at the end of June versus approximately three weeks at March 31st. Turning to operating expenses, we reported 51.5 million of gap operating expenses for the second quarter, which includes a non-recurring expense of $5 million related to previously announced mandatory exchange with companies American depository shares and termination of the American depository receipt program.
Speaker Change: Ultimately is the decision by the FDA to agree with us on that approach, but we do believe that there is a pathway based upon other products that have been approved that are bio equivalent only pathway is a viable pathway.
Speaker Change: Assuming we can demonstrate vial available.
Speaker Change: <unk> equivalents and the FDA agrees with that.
Gregory Divis: And then lastly, on IH, are you thinking about that opportunity as something where you can expand the market, or do you see switching away from XyWave to LumRise in the IH setting, or is it a little bit of both? Thanks. Thanks, David. I'll try to pick those off one at a time.
Gregory Divis: Again, I think when it comes to our development strategy and our approach to a low or no sodium formulation, we have to understand what's in the patent landscape, for sure. And so we would be pursuing that. You should assume that we're pursuing our direction accordingly and that this is being considered, you know, appropriately in our development plan. If it was as simple as just formulating something, you know, similar to what's in the market today, it would have already been done from that sample.
Speaker Change: And lastly in terms of IH I think right now.
Speaker Change: You've heard Jen talk about the research and the symposium.
Jen: Symposium at the FDA held specifically.
Speaker Change: <unk> 800 patients talked about.
Thomas McHugh: As a result of the mandatory exchange,avidal was added to the Russell 3000 index at the beginning of July. The second quarter also included $6.5 million of non-cash charges comprise a stock-based compensation of $5.5 million and depreciation in amortization of $1 million.
Speaker Change: The need for more therapeutic options their symptoms are not controlled with the current available treatment. So from our perspective, just the narco narcolepsy patients may choose.
Gregory Divis: So, again, we're very conscious of what the patent landscape is out there and navigating it appropriately. Number two, on your question about the development pathway using bioequivalence, that ultimately is a decision by the FDA whether to agree with us on that approach. But we do believe that, based upon, you know, other products that have been approved, that a bioequivalent only pathway is a viable pathway, assuming we can demonstrate bioequivalence, and the FDA agrees with that.
Speaker Change: Due to the nature of this condition to want to switch. The Libra is should it be approved argue with we think it is important to add another treatment option. We think the nature of this condition is such that I want that bedtime option in the form of <unk> is very very compelling to patients and we hear that all the time in particular from from physicians and key opinion leaders.
Gregory Divis: And lastly, in terms of IH, I think right now you've heard Jen talk about the research and the symposium that the FDA held specifically, where 800 patients talked about the need for more therapeutic options, that their symptoms were not controlled with the current available treatments. So, you know, from our perspective, just in narcolepsy, patients may choose, due to the nature of this condition, to want to switch to Loom Rise. Should it be approved?
Gregory Divis: Our view is we think it's important to add another treatment option. We think the nature of this condition is such that a once-a-bedtime option in the form of Loom Rise is very, very compelling to patients, and we hear that all the time, in particular from physicians and key opinion leaders, who will, you know, as Jen, I think, noted, are very, very bullish on the prospects of what Loom Rise could offer for their patients, primarily because these patients struggle with the ability to wake up full stop, right, to take their second dose.
Thomas McHugh: William. After adjusting for these items, which total $11.5 million, remaining cash operating expenses were approximately $40 million. We've expected for the remainder of 2024, recurring quarterly cash operating expenses will be in the range of $40 to $45 million, and non-cash operating expenses will be in the range of $5 to $7 million. With respect to the balance sheet, we have 71.4 million of cash, cash equivalence, and marketable securities as a June 30th. The use of cash during the second quarter included the $5 million of expense related to the termination of the American Depository Receive Program.
Jen: Who will as Jen I think noted are very very bullish on the prospects of what <unk> could offer for their patients primarily because these patients struggle with the ability to wake up full stop right to take their second dose.
Gregory Divis: So, again, for us, it's an option for all patients, whether they're on therapy today, and what we know today is that there are, you know, depending upon what data set you look at, there are anywhere from 30,000 to 40,000 patients with a unique diagnosis code related to idiopathic hypersomnia, and a small percentage of those are actually being treated with the only FDA-approved drug today. We think Loom Rise offers a really great option for them as well. So, thank you.
Speaker Change: So again for us it's an option for all patients whether they are on therapy today and what we know today is that there is no depending upon what data set you look at there's anywhere from 30% to 40000 patients with a unique diagnosis code related idiopathic hypersomnia and.
Thomas McHugh: I'll finish my remarks with a few comments regarding our expectations for the remainder of 2024. We continue to pay close attention to the cell side estimates, and at this time, you're comfortable with the current revenue consensus of approximately $168 million for the full year, including the possibility that it could be higher if actual results, such as the rate of increase in reimburse patients, the total number of reimburse patients were treated with luminous, and net pricing outperformed the assumptions currently used by the cell side analysts.
Speaker Change: A small small percentage of those are actually being treated with the only FDA approved drug today. We think numerous offers a really great option for them as well so thank you.
Speaker Change: Alright, thank you.
Mark Goodman: Our next question comes from the line of Mark Goodman of Lering. Your line is now open.
Speaker Change: Our next question comes from the line of Marc Goodman of Leerink. Your line is now open.
Thomas McHugh: Tom, I know we talked about, you know, the question a little bit already. Let's get a sense of Freak Good. How much, you know, what percent of free goods? Well, this is the second quarter, maybe. Unknown Attendee The direction you're moving in there and the impact it has, and just more broadly on the market, what's your sense of the total number of patients? Like, you know, how much did it grow versus, you know, before you launched? Thanks.
Speaker Change: Tom I know we talked about.
Speaker Change: Kristin.
Kristin: Thank you.
Thomas McHugh: Lastly, with respect to our timeline to reaching break even, we were very close to achieving this during the second quarter, when comparing $38.7 million of gross profit to approximately $40 million of recurring cash operating expenses, which resulted in an adjusted operating loss of approximately $1.2 million. Based on our current plans and assumptions, we expect that adjusted operating income will be positive, beginning in the third quarter, and continue to be positive for the remainder of 2024. Our expectations regarding adjusted operating income are based on a number of factors, including the number of reimburse patients on luminous, net pricing of luminous, and recurring cash operating expenses.
Kristin: Give us.
Kristin: Free goods.
Speaker Change: How much.
Speaker Change: What percent of free goods.
Speaker Change: The second quarter of Davidson.
Speaker Change: Okay.
Speaker Change: The direction, there and the impact it.
Speaker Change: And then just more broadly on the market, what's your sense of the total number of.
Speaker Change: Patients like how much did it grow versus.
Speaker Change: Before you launch thanks.
Mark Goodman: Yeah, Mark, you're a little bit breaking up. So I just want to make sure your first question is, I believe the patients who are on the free product, right? Relative to the total. And then the second is just how we're doing in the market, the market trending. So, how much of the market changed exactly, you know, before you launched StemPow?
Mark: Yes, Mark.
Mark: A little bit breaking up so I just want to make sure. Your first question is.
Speaker Change: I believe that patients who were on a free product right relative to the total.
Speaker Change: The second is just our.
Speaker Change: Our GE in the market the market terrific.
Gregory Divis: And with that, I'll turn the call back to Greg for closing remarks. Thank you, Tom. Before we wrap up, I want to take a moment to comment on our publicly reported launch metrics, and what to expect moving forward. This quarter, we added a new metric, the total number of patients on therapy. For the full year of launch now behind us, going forward, we intend to report only this patient metric, and of course, revenue, as we believe these two metrics are the most important as our launch matures.
Speaker Change: How about on the market's changed exactly.
Speaker Change: Before you lost somehow.
Richard Kim: Yeah, no, thanks for the questions, Mark. You know, for us, where we are with Lumirise in the launch right now, we think the single most important thing that can happen is that HCPs and patients get experience with Lumirise. The feedback thus far has been terrific, and we really see free products as an investment in our launch overall. Now, what we hear from other, especially chronic product launches, is sort of free products being used in about that 20 to 25 percent range of total patient usage. We think that's a pretty good proxy when you think about things.
Speaker Change: Yes, no thanks for the questions Mark.
Speaker Change: For us where we are with bleomycin loss right now we think the single most important thing that can happen is hcp's patients get experience.
Speaker Change: And the feedback thus far has been terrific and we really see free products as an investment in our launch overall.
Speaker Change: What we hear from other specialty sort of chronic product launches as sort of free product is being used in about that 20% to 25% range of total patient usage. We think that's a pretty good proxy when you think about things and.
Richard Kim: And for our business, over 80 percent of our business is commercial today. I think Gregory commented that as part of our business, we would anticipate getting more of our CMS patients, especially Medicare patients, being picked up in 2025. So we do believe that things will improve for us. But once again, it really comes down to us doing free products as an investment and gaining HCP and patient experience. And ultimately, we are also able to convert some of these patients using our programs, either our bridging program or temporary assistance program, and our permanent affordability program onto reimbursed patients as well. So, as far as the overall market size is concerned, We've had, with our claims data provider; it's been a little bit messy in the second quarter for us overall.
Gregory Divis: We believe we are well positioned to execute our business priorities, including our ongoing launch of luminous, and our lifecycle management opportunities, both of which are focused on our primary business objective, maximizing the full value of luminous. So in conclusion, we're very, very pleased with our progress and our growth thus far, recognizing that we have much more to accomplish. We thank you for your support and the forward of providing future updates on our progress.
Speaker Change: And for our business over 80% of our business is commercial today I think <unk> commented that part of our business, we would anticipate getting more of our CMS, especially Medicare patients being picked up in 2025.
Speaker Change: We do believe that things will improve breast, but once again it really comes down to us as doing free product, that's an investment in getting at HCP and patient experience and ultimately we are also able to convert some of these patients using our programs either.
Operator: And with that, we will open the call for questions operator. Thank you. At this time, we will conduct the question and answer session. As a reminder to ask a question, you will need to press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. Please stand by. We will compile the Q&A roster. Peter.
Speaker Change: Bridging program, our temporary fixes program are permanent or quite.
Speaker Change: Portability programs onto reimbursed patients as well so and.
Speaker Change: And as far as the overall market places concern.
Speaker Change: We have had with our claims data provider, it's been a little bit messy in the second quarter.
Richard Kim: But what we see overall in the marketplace, Mark, are a few good leading indicators for why we believe the market is growing for OxyBase. The first is the previously discontinued patients who have been poisoned on OxyBase. We believe these patients are uniquely a lumen rise opportunity, and we're getting a good portion of those starting and initiating therapy with lumen rise. The second is that we are getting more new to nave patients initiating on lumenites. That's consistent with the market research that we heard prior to launch that lumenites would open the doors for more new to oxidative patients considering going off an oxidative.
Speaker Change: Overall, what we see overall in the marketplace that market a few good leading indicators for why we believe the market is growing for octavate.
Andrew Sy: Our first question comes from the line of Andrew Sy of Jeffries, your line is no open. Hi, good morning, congrats on the strong launch and appreciate you sharing the metrics. Thanks for taking our questions. So, the first one is if we were to take another look, data cut as of July or even early August, how does the slope of uptake look so far? Should we be factoring in some kind of summer seasonality, do the holidays vacations this quarter, or should we expect slope of patient additions and so forth to remain unchanged or even increased this quarter?
Speaker Change: The first is the previously discontinued patients to quite frankly off debate. We believe are uniquely a BMI of opportunity and we're getting a good portion of those starting and initiate therapy with <unk>.
Speaker Change: The second is we are getting more new Tonight naive patients initially and that's consistent with the market research that required prior to launch that we will open the doors for more new to occupy patients considering going back to approximate the third thing that we talked about earlier with that we are getting unique prescribers, who had never prescribed a <unk> ox base that are not prescribing new mice as well so.
Richard Kim: The third thing that we talked about earlier was that we are getting unique prescribers who have never prescribed a first-generation oxidative are now prescribing lumenites as well. So we view these as all early positive signs that the market is growing beyond where the first-generation oxidative market was. Yeah, I just want to emphasize a couple points Richard made. Again, I'll just restate it.
Speaker Change: We view these as all early positive signs that the market is growing beyond where the first generation <unk> market was I.
Andrew Sy: Thanks. Thanks, Andrew. I think we would qualitatively characterize it as, you know, our turns remain consistent. As we've seen to date, this is our first summer that we've been in the marketplace. So, you know, whether there's seasonality or not, we'll have a chance to assess that for Luma, specifically, as we get through the period.
Gregory Divis: I just want to emphasize a couple of points Richard made. Again, I'll just restate it.
Speaker Change: I just wanted to emphasize a couple of points Richard made again I'll just restate it.
Gregory Divis: Number one is that we don't think Lumrise is going to dramatically be different in terms of its percentage of free drug versus other products. But what we've seen, which is really positive, is that when a coverage policy decision comes into play, as Richard noted, we've been able to convert patients into an essence of paying patients. So that's something that our team is focused on, and we'll continue to do that.
Speaker Change: Number one is that is that we don't think <unk> is going to dramatically would be different in terms of its percentage of free drug versus kind of other products, but what we've seen which I think is a really positive as we've seen patients when a coverage policy decision comes into play as Richard noted, we've been able to convert them to us.
Gregory Divis: But at this point, I think we would describe it as continuing to be consistent at what we've seen. Great. And then secondly, speaking of just the slope being consistent, you know, the pediatric could be approved in a month from now. So, that's 5% of the current ox-bait users. So, is it fair to assume there could be a nice little bolus coming from that approval, or could the uptake in the sub-population be slower than what we're thinking?
Gregory Divis: And again, I think the way I think about the notion of what's happening with the market, because the secondary data sources are a little choppy right now, is that patients that were getting added to Lumrise, sources of business were getting added to Lumrise as new starts. They're not in the denominator of kind of the legacy market, right? Those patients weren't there before.
Speaker Change: A pain patient so that's something that our team is focused on and we'll continue to do that and again I think the way I think about the notion of what's happening with the market because kind of the secondary data sources are a little choppy right now.
Speaker Change: Patients that were getting added to loom rise sources of business, we're getting added to <unk> new starts they're not in the denominator of kind of the legacy Mark right those patients werent there before so from our perspective that is a great sign in terms of what are the prospects one year into launch of what the potential future <unk>.
Gregory Divis: Thanks. Yeah, I think as we think about it, it's an important addition to our label because we hear quite a lot from parents who wake up in the middle of the night after night. Again, it's a relatively small patient population. So, I think over time, we have an opportunity to both convert patients as well as potentially even expand the use of the pediatric market over time based upon some of our insights. I think if we think about the balance of 2024, it's modestly and marginally incremental at this point. But, you know, longer term, we think it's really important. Great. Thank you so much. Thank you.
Ashwani Verma: So from our perspective, that is a great sign in terms of what the prospects, you know, one year into the launch, hold for our ability to really grow this market. Thanks, Mark. Thank you. Our next question comes from the line of Ashwani Verma of UBS.
Speaker Change: <unk> for our ability to really grow this market.
Speaker Change: Thanks.
Mark: Thanks Mark.
Mark: Thank you.
Ashwani Verma: Our next question comes from the line of Ashwani Verma of UBS. Your line is now open.
Speaker Change: Our next question comes from the line of <unk> Verma of UBS. Your line is now open.
Amit Verma: Hi, Good morning, Amit Bob on behalf of Asharah UBS. Thanks for taking my question just very quickly can you talk about what you're seeing in terms of discontinuation persistence rates any change from what we've seen early in the launch and just a quick second question are you seeing any impact in the second quarter from Xyrem.
Frank: Our next question comes from the line of friends who are visible of Oppenheimer. Your line is now open. All right. Thanks for taking the questions. I was just wondering in terms of reimbursement, where we stand now, and just the impact there of if you kind of cut it as a revenue per patient, and obviously appreciate the new metric and the look back at that new metric and what it meant. But if we're thinking about revenue per patient, is there any impact expected from reimbursement here in the second half?
Speaker Change: Being removed from certain formulary. Thank you.
Richard Kim: Thank you very much, Richard. Yeah, no, thanks for the question. So as far as it comes to just
Speaker Change: Okay.
Richard Kim: Thanks for the questions. So as far as it comes to discontinuations, what we see holistically is Lumrise has lower discontinuation rates than the first-generation Oxibase when we compare that to time-matched cohorts of patients throughout the launch. What we do know historically is discontinuation rates for Oxybates tend to be higher earlier in treatment, and they tend to subside over time, and that's also what we see with Lumerines, although once again, lower than first-generation Oxybates.
Speaker Change: Thank you very much Richard and thanks.
Speaker Change: Thanks for the questions.
Speaker Change: So with as far as the <unk> discontinuation, what we see Holistically is Lou <unk> has lower discontinuation rates in the first generation of OXXO base, when we compare that matched cohorts of patients at broke the launch what we do know historically is discontinuation rates for Oxford tend to be higher earlier in treatment.
Frank: Maybe Richard, you can cover reimbursement. Tom, kind of value per patient. Yeah. Thanks for the question. Yeah. We're super pleased with how our market access team is performed. At today, we have about 85% of commercially covered lives where we might fall to exist. So it's been really strong, which has really helped to drive us being able to get patients initiated. So I'm going to sort of pick the revenue per patient. Yeah, so thanks Frank.
Speaker Change: They tend to subside over time, and that's also what we see with <unk> once again lower than first generation Octavate.
Richard Kim: And the discontinuation rate is probably driven a little bit more from naive patients and previously discontinued patients that do have a higher discontinuation rate than switch patients do over time. But we've also learned a lot, like we have in other components of our launch. We're learning a lot from ACPs and patients. We're learning how to intervene differently, when to intervene, how to intervene, and how to specialize things depending on which patient type.
Speaker Change: The discontinuation rate is probably driven a little bit more from naive patients and previously discontinued patients that do have a higher discontinuation rate them to switch patients do over time.
Speaker Change: We've also learned a lot like we have in other components of our launch we're learning a lot of from ACP and patients. We're learning how to intervene differently. When nature gained cod intervened had a specialized things depending on which patient pipe.
Frank: The revenue per patient. You know, last quarter, you know, we had talked about exiting the quarter at about 120,000. Per Reimbursed Patient. We've seen some improvement in that, that nut pricing heading into Q2. Let's say it's natural to some extent because Q1 is pretty heavily impacted by growth and other adjustments. So we do see some improvement in Q2. I think the only other comment I would add regarding reimbursement is that the other segments of our business, which represents 15 to 20% of enrollments are really non-commercial, predominantly Medicare and Medicaid.
Richard Kim: So we know that every product does have dropouts, and that's true of any medication. But we work really hard to get these patients started, and we're going to be working really hard to make sure that the right patients stay on therapy as well. And as far as your second question about the impact of Xyrom, yeah, I mean, clearly there were some changes in some formulas that happened earlier this year, and we did benefit from some of those patients going on to Lumrise.
Speaker Change: So we know that every product does have dropouts and that's true of any product medication, but we work really hard to get these patients started and we're going to be working really hard to make sure that the right patients stay on therapy as well.
Speaker Change: And as far as your second question about the impact from Xyrem.
Speaker Change: Clearly there were some changes with some formula that happen or this year, we did benefit from some of those patients going on totally right.
Richard Kim: But we also know that our value proposition is very strong against all the first-generation toys on the Oscar base. So those switch patients, as you mentioned before, remain an important source of our business, in addition to the other two segments as they go forward.
Speaker Change: But we also know that our value proposition is very strong yet all of our generics and quite frankly off the base.
Frank: And as we get into 2025, where a lot of those decisions will be made for luminaries, which we weren't eligible in 2024, especially for Medicare, we'll get a better sense of how our coverage evolves beyond the commercial coverage, you know, as we roll closer to the end of this calendar year. Thank you. And then maybe just just lastly, in terms of new prescribers to oxalate that weren't prescribers before the 4,000 or greater than 4,500, I know it's concentrated, but did you guys approach these dogs?
Speaker Change: Those switch patients as we mentioned before remain important parts of our business is in addition to the other two segments as well as we go forward.
Speaker Change: Great. Thank you.
Speaker Change: Okay.
Speaker Change: Thank you.
Oren Livnat: Our next question comes from the line of Oren Livnat of HC Wainwright. Your line is now open.
Speaker Change: Our next question comes from the line of Oren <unk> of H C. Wainwright. Your line is now open.
Oren Livnat: Thanks, I appreciate it. Clearly, you have plenty of room to grow in Herculepsy, but you're pretty aggressively pushing into IH. And I have just a couple of questions there. First, what's the reasoning behind trying to get in there right away now while that market is maybe not as developed? Is there any reason to maybe let your competitor with twice nightly continue to make the investments and do the legwork, probably the tougher lifting to grow that market first and get Oxybate established as a therapy versus getting in there ASAP?
Oren: Thanks I appreciate it.
Oren: Clearly you have plenty of room to grow and article FC Rideshare pretty aggressively pushing into IH and I have just a couple of questions there.
Oren Livnat: And also, do you believe you have, you know, IP aside, freedom to operate there given that there's some different labeling on the Zywave side and some of the arguments your competitor is making on that front in court?
Frank: Is this surprising that these dogs who never prescribed oxalates for over 20 years, you know, have started based on the ones nightly, is just more awareness, where do these dogs come from? Thanks, Frank. So for the vast majority of those providers, we have not called on them. So I think this really speaks to the really tremendous value proposition that Amarice brings. And in our pre-launched market research, when we tested our profile with high use narcotics prescribers who don't use oxalates, half of them said with the profile of the Amarice they would want to provide the Amarice compared to what they haven't done with the first generation oxalates.
Oren: First.
Speaker Change: What's the reasoning behind trying to get in there right away now while that market is maybe not as developed is there any reason to maybe let your competitor. It was twice nightly continued to make the investments and do the legwork.
Speaker Change: The harder tougher lifting to grow that market first and get oxy made established therapy versus getting in their Asap and also do you believe you have.
Speaker Change: The Ips side, our freedom to operate there given I think there are some different labeling on the zywiec side. Some of the arguments were competitors, making on that front and courts and I have a follow up.
Frank: So we think it's a really positive sign and something for us to build upon going forward. Yeah, I'll just add to Richard's comments is that, you know, it's really interesting to us that we're getting demand without any really true efforts on our part directly in terms of promotion. So it's something where you value waiting to see if there's some more we can do there for sure. Great, thank you. Thank you.
Gregory Divis: Oren, you know, whatever the competitor is doing, they're doing it right, from that perspective. But it's clear to us in our feedback from physicians and patients that there is an unequivocal need for Loom Rides in this category, in this patient population, and we're not going to wait for someone else to do whatever they're going to do to serve this community and help expand and build our franchise. And regardless of what's in their label or what arguments they make or don't make, it doesn't matter to us because we believe we're going to introduce Loom Rides to this patient population.
Speaker Change: Oren.
Speaker Change: What are the competitors doing theyre doing right from that perspective, but it's clear to us and our feedback from physicians and patients that there is an unequivocal made premium rigs in this category in this patient population and we're not going to wait for someone else to do whatever they're going to do fixed to serve this community and help expand and build our franchise and.
Speaker Change: Regardless of what's in their label of what arguments they make or don't make it.
Ami Fadia: Our next question comes from the line of Ami Fadiya of Needham and Company. Your line is now open. Hi, good morning. Thanks for taking my question. Can you give us a sense of what percent of patients that are currently on normal rise? Either came from one of the other oxalates versus previously discontinued as well as never on oxalates before. Any and then if you could give us any updates on both through at the peer level across the three GPUs that you have contracts with perhaps any color on, you know, humana or some of the other often plans would be helpful. Thank you.
Speaker Change: It doesn't matter to us because we believe we're going to introduce wound price in this patient population. It will be well received it will serve and habits rightful place and has the opportunity to make a difference and arguably the market leader in this category as well so we.
Gregory Divis: It will be well received. It will serve and have its rightful place and has the opportunity to make a difference and, arguably, become the market leader in this category as well. So we believe we have full rights to operate accordingly. And at the end of the day, the market has spoken to us in the form of patients and physicians who have said, get us Loom Rides as fast as you can. That's what we're trying to do.
Speaker Change: We believe we have full rights to operate accordingly, and and at the end of the day. The market has spoken to us in the form of patients and physicians, who say get us numerous as fast as you can that's what we're trying to do.
Speaker Change: Okay and.
Oren Livnat: Okay, and It's really impressive that you guys are, uh... Roscoe Brooks, MD COP 2021 Q&A Page 9 of 9, And also, I'm curious about cash conversion going forward too. Obviously, it's not surprising accounts receivable are accumulating as the product grows rapidly, but do you expect that to reverse in the second half?
Speaker Change: Truly impressive that you guys are.
Speaker Change: Projecting adjusted breakeven next quarter, and I think opex is actually lower than I had modeled excluding that item this quarter.
Speaker Change: Can you just talk about.
Ami Fadia: Yeah, thanks for the questions, Ami. So as far as sort of like percentage of switch versus sort of never on and oxalates before, the biggest drug prep patients that we have right now are still being sourced from switch patients from versionary oxalates with the highest percentage of those being from the mix up overall as well. So what we are seeing at the same time though is that the new to oxalates patients are starting to increase the representation as well.
Speaker Change: You are growing revenue really rapidly opex not so much or at all now.
Speaker Change: How does that look going forward.
Speaker Change: Are you right sized for continued dramatic growth from here IHS side or do you think you need to invest more behind this product along with revenues.
Speaker Change: And also in that.
Speaker Change: Cash conversion going forward to obviously and thats not surprising accounts receivable are accumulating as a product grows rapidly, but you expect that to reverse in the second half.
Ami Fadia: And we really see that as a very positive sign with these sort of continues of course the value proposition of movement. So the biggest chunk are still switch patients, but we are starting to see a bit of an increase in the representation of the new patients prior to the oxalates, and as far as the GPO representation concern, I think, you know, traditionally what we sort of see is the Zinc CVS slides are and the scent lives are the biggest chunk of often being smaller.
Thomas McHugh: I'll save the second question for Tom. In terms of your comment about whether we need to invest more in the launch, here's how we would describe it. Again, we're constantly evaluating our sources of business and where opportunities are to try to accelerate the launch of Loom Rides. I would say that we are generally well positioned and well resourced to maximize the primary opportunity in Loom Rides. But we are not the least bit shy of deploying more capital or investing in opportunities if we believe it has an opportunity to really grow both the speed and the peak of what Loom Rides can achieve from that standpoint.
Speaker Change: Ill take the second question for Tom.
Speaker Change: In terms of your comment about do we need to invest more on the launch here's how we would describe it.
Speaker Change: Again, we're constantly evaluating our source of business and where opportunities are to try to accelerate the launch of <unk> I.
Speaker Change: I would say that we are generally well.
Ami Fadia: And I think what we're seeing in general is the channels being represented by the size of those GPO contracts with the Zinc being the largest, ascending to the second largest, and then the MSR awesome business being the smallest of the three. So pretty consistent with the sizing opportunity of those three contracts that we have. Yeah, I think the only other comment I would add that is that I think it's fair to say that the significant majority of the lives underneath those GPO umbrellas have established policy coverage decisions.
Speaker Change: Deployed and well resource.
Speaker Change: To maximize the primary opportunity in Europe, but we are not the least picked shy.
Speaker Change: <unk> more capital or investing in opportunities. If we believe it has an opportunity to really grow that both the speed and the peak of what we can achieve from that standpoint. So it's something we're always looking at.
Thomas McHugh: So it's something we're always looking at. We'll point to the comment that we made earlier today that we're seeing patients go on Loom Rides from physicians who we are not actively calling. So we've been trying to understand that, and what are the profiles of those physicians?
Speaker Change: 0.2, the comment that we made earlier today that we're seeing we're seeing patients go on <unk> from physicians, who we are not actively calling them.
Ami Fadia: Now, not all of them, with regards to with regards to the number. So I think I think getting to your question, we've got policy coverage decisions in place and pulled through those through the GPO contract. Okay, great.
Speaker Change: We've been trying to understand that and what are the profile of those physicians and is there an opportunity to.
Gregory Divis: And is there an opportunity to pursue that more aggressively and accelerate that segment? We've always believed, longer term, that was going to be something we were going to pursue over time, but it has moved faster, maybe faster than we had assumed, which we think is positive. And it's something we're looking at. But I think, at the end of the day, it doesn't change our outlook in terms of our view on profitability and generating operating income in the second half of this year and going forward.
Speaker Change: To pursue that more aggressively and accelerate that segment. We believe we are always doing longer term that was going to be something we were going to pursue over time, but it has moved faster maybe than what we had assumed which we think is positive and it's something we're looking at so I think at the end of the day it doesn't change our outlook in terms of.
Unknown Attendee: If I may ask one more question, can you just sort of walk us through, give us an update on the cadence of when you expect decisions from the ongoing IP cases. And specifically on the jazz was at the case, can you walk us through the upside down slide and how we should think about, you know, in a downside scenario, the ability to keep memorized on the market should a decision go in favor of jazz.
Speaker Change: Yes.
Speaker Change: Our view on profitability and generating operating income in the second half of this year and going forward, but it does it is something we're always looking at because at the end of day maximizing reminds as our primary objective.
Gregory Divis: But it is something we're always looking at because, at the end of the day, maximizing Loom Rides is our primary objective. Yeah, Oren, thanks for the question. Listen, we believe we're going to hit cash flow breakeven this year. You picked up on a key point. And it's not surprising that as we grow, our working capital will increase primarily in the form of accounts receivable. But what you see sitting on the balance sheet at June 30th, we'll convert to cash in Q3.
Unknown Attendee: Thank you. Well, in terms of timing, I think it's our view that the next decision will likely come out of the APA case in DC, followed by the patent case in Delaware. You know, so when that is, you know, we don't know and they could come in a different order. I guess that's ultimately at the discretion of the judge from that perspective. And we remit again, our position has been changed. We're very confident in our views.
Oren: Yes Oren.
Oren: Thanks for the question.
Oren: We believe we're going to hit cash flow breakeven. This year you picked up on a key point and it's not surprising that as we grow our working capital increased primarily in the form of accounts receivable.
Oren: But when you see sitting on the balance sheet at June 30, we will convert to cash in Q3.
Oren Livnat: Perfect. Thanks. I appreciate it. Our next question comes from the line of Myriam Belghiti of Lifestyle Capital. Your line is now open.
Speaker Change: Perfect. Thanks, I appreciate it.
Ron: Thanks, Ron.
Unknown Attendee: And even if a decision were unexpectedly go against us in that regard, we're prepared to take whatever steps necessary to ensure that numerous stays on the market to be able to treat patients accordingly, and we believe that will be the case. But I'll close out again on the litigation matters that we're highly confident in our position.
Speaker Change: Thank you.
Speaker Change: Our next question comes from the line of Miriam <unk> of <unk> capital. Your line is now open.
Miriam: Thank you and congrats on the quarter and launch progress just a quick question for me for the Phase III <unk> study.
Miriam: Study, how should we be thinking about success here and how do you think normalizes performance will hold compared to that assured from the idea of approved product.
Gregory Divis: And I'll remind all of our investors that, you know, there's other cases that are coming up to this as well, including our anti trust case, which has been set for November of the next year. For which we're pursuing, uh, requisite damages for the unnecessary delay of Luma, uh, Luma approval due to the inappropriate listed rents tax. But in terms of timing, it's really at the discretion of the judge and what we're prepared to ask according. Thank you.
Myriam Belghiti: Well, again, and I'll make some comments, and Jen, feel free to weigh in. I think, at the end of the day, we have an excellent proxy in terms of narcolepsy, in terms of how Lumrise performed in our clinical trial relative to the first generation oxybates. Right. That gives us high confidence that Lumrise will be successful in our IH trial that we've initiated. So we're highly confident that we'll demonstrate a highly statistically significant benefit to patients. And from that standpoint, we remain highly confident. Anything you want to add to that? The only thing I will add is the enthusiasm of the investigators who are participating in this trial.
Speaker Change: Well again.
Jan: I'll make some comments and Jan feel free to weigh in I think at the end of the day, we have an excellent proxy in terms of narcolepsy in terms of how <unk> performed in our pivotal trial relative to the first generation Octavate right. We believe that gives us high confidence that <unk> will be successful in our NR.
Jan: And our IH trial.
Jan: We've initiated so we're highly confident that we will demonstrate.
Jan: Highly statistically significant benefit to patients and from that standpoint, we remain we remain highly confident anything you want to add to that the only thing I will add is that the enthusiasm from the investigators who are participating in this trial certainly underscores everything that Greg has said there is a line of review.
David Amsellem: Our next question comes from the line of David and so on of Piper Sandler, your last open. Hey, thanks. Just a couple for me.
Jennifer Goodman: The only thing I will add is that the enthusiasm from the investigators who are participating in this trial certainly underscores everything that Greg has said. There is a long overdue, unmet need to be able to provide an extended release form of sodium oxidate for IH, which only Lumerize will provide if it's approved.
David Amsellem: I know you're going to have more updates on the low sodium product, but can you talk to generally the the IP situation on that formulation and your level of confidence? So you're not going to run a foul of jazz's intellectual property surrounding their low sodium, um, oxidate product. So, so that's number one, um, then number two is, um, is it fair to say that with a bio equivalent pathway for that there's a relatively rapid path to market for that formulation.
Speaker Change: And that need to be able to provide an extended release form activity amongst debate for IH, which only new mines will provide its accretive.
Myriam Belghiti: That's it. Thank you for taking my questions. Thank you. Thank you. Our next question comes from the line of Matt Kaplan.
Speaker Change: Got it thank you for taking my question.
Mary: Thanks Mary.
Speaker Change: Thank you.
Matt Kaplan: Our next question comes from the line of Matt Kaplan of Leidenberg-Tholman. Your line is now open.
Speaker Change: Our next.
Speaker Change: <unk> comes from the line of Matt Kaplan of Ladenburg Thalmann.
Speaker Change: Line is now open.
Matt Kaplan: Hey, good morning, guys.
Speaker Change: That's on the strong quarter results.
Gregory Divis: And then lastly on IH, are you thinking about that opportunity as something where you can expand the market or do you see switching away from thy wave to Luma rise in the ice setting or is a little bit of both. Thanks, David. I'll take those off one at a time. Again, I think when it comes to our development strategy and our approach to a lower no sodium formulation, we have to understand what's in the patent landscape, for sure.
Speaker Change: Stay on the IH theme, a little bit can you talk about maybe it's a little bit early since you guys started the trial, but the timeline for the phase III and then also the regulatory pathway.
Speaker Change: You think youll need to.
Speaker Change: <unk> studies are one be sufficient for <unk>.
Speaker Change: An NDA file.
Gregory Divis: I'll take the first part of that, and Jen, feel free to weigh in on the second point. Matt, I think you made a good point, which is that it's early in the trial. We're just getting our early sites initiated. We haven't reached our full run rate or steady state yet. We're very pleased with the fact that, in a very short order from site initiation, we've seen patients move into prescreening, and patients go on treatment.
Speaker Change: I'll take the first part of that and.
Speaker Change: And Jen feel free to weigh our way in the second quarter.
Gregory Divis: And so we would be pursuing that of course, you should assume that we're pursuing our direction accordingly, and that with that being considered appropriately in our development plan. If it was as simple as just formulating something, you know, similar to what's in the market today, it would have already been done by now, from that sample. So again, we're very conscious of what the patent landscape is out there and navigating it appropriately.
Speaker Change: You made a good point, which is that it's early in the trial were just getting our sites initiated our early sites initiated we haven't reached our let's go our full run rate of steady state. We're very pleased with the fact that in a very short order from a site initiation, we've seen patients move into pre screening patients go on therapy.
Gregory Divis: From the early data points, we're excited about that, but we haven't reached our full potential, if you will. It's going to take a while before we're at our full capacity. So I think it's difficult to project how long we think it's going to take. We've always said that the best proxy right now is kind of how long it took the other products, the other Oxfam products, to get through their Phase 3. And that was, let's just call it, 15 to 18 months.
Speaker Change: Go on treatment. So we're by the early data points, we're excited about that but we havent restart if you will it's going to take a while before at our full capacity. So I think it's difficult to project how long.
Speaker Change: We think it's going to take we've always said that we believe the best proxy right now is kind of how long it's taken the other products. The other offer the product to get through there and through their through their phase III.
Gregory Divis: Number two, on your question about the development pathway, using a viral equivalent, that ultimately is a decision by the FDA to agree with us on that approach. But we do believe that there is a pathway based upon, you know, other products that have been approved that a bio equivalent only pathway is a viable pathway. Something we can demonstrate by our equivalents and the FDA agrees with that.
Speaker Change: No that was liquids call. It 15 to 18 months, we think that's the right proxy for us now to be clear our assessment, our assumptions around that changes, we'll be sure to communicate accordingly.
Jennifer Goodman: We think that's the right proxy for us now, and to be clear, our assessment, our assumptions around that change. We'll be sure to communicate accordingly, you know, as and when we're up and running more at kind of full steam and steady state. So in terms of regulatory pathway, Jen, sure.
Gregory Divis: And lastly, in terms of I age, I think right now, you know, you've heard Jen talk about the research and the symposium that the FDA held specifically where 800 patients talk about, you know, the need for more therapeutic options that their symptoms are not controlled with the current available treatment. So, you know, from our perspective, just the narcolepsy patients may choose due to the nature of this condition to want to switch the moonlight to be approved.
Speaker Change: When we're up and running more kind of full steam in steady state. So in terms of regulatory pathway.
Jennifer Goodman: Sure, happy to comment on that. We're very pleased with the engagement that we've had with the FDA. This will be a supplemental new drug application. And, of course, there is prior precedent where there was only one pivotal trial to achieve approval in idiopathic hypersomnia. So we very much believe that's our pathway as well.
Speaker Change: We're happy to comment to that we're very pleased with the engagement that we've had with the FDA. This will be a supplemental new drug application and of course theres. The prior precedent, where there was only one pivotal trial to achieve approval in idiopathic hypersomnia. So we very much believe that's our pathway as well.
Matt Kaplan: Great. Great. Thanks. Thanks for adding the detail. Thanks, Matt.
Speaker Change: Great Alright, thanks, Thanks, Adam Thanks, Matt.
Operator: As a reminder, to ask a question, you will need to press star 1 once. Our next question comes from the line of Brandon Foulkes of Rodman & Renshaw. Your line is now open.
Speaker Change: Thank you.
Speaker Change: As a reminder to ask a question you will need to press star one one.
Gregory Divis: Our view is we think it's important to add another treatment option. We think the nature of this condition is such that I want that bedtime option in the form of moonlight is very, very compelling to patients. And we hear that all the time. In particular, from physicians and key appendulators who will, you know, as Jen, I think noted, are very, very bullish on the prospects of what we're going to offer for their patients.
Speaker Change: Our next question comes from the line of Brandon Folkes of Rodman and Renshaw. Your line is now open.
Brandon Foulkes: Alright, thanks for taking my questions and congratulations on a very good quarter. Maybe just two follow-ups from earlier questions from me.
Brandon Folkes: Alright, Thanks for taking my questions and congratulations on a very good quarter.
Brandon Folkes: Maybe just two follow ups from earlier questions for me.
Brandon Foulkes: Coming back to the pediatric population, how does the educational awareness compare in this population to get a patient or, I guess, a caregiver to switch and convince them to move a pediatric patient off a therapy that, you know, may not be as good as Lumrise but, in their minds, may be adequate, perhaps, compared to what they've tried in the past? And then similarly, you know, just given the weight-based dosing there, how much of a focus will the pediatric population be for the sales force, given the runway in the adult population?
Speaker Change: Back to the pediatric population how does the educational awareness compare.
Gregory Divis: Primarily because these patients struggle with the ability to wake up full stop right to take their second dose. So, again, for us, it's an option for all patients, whether they're on therapy today. And what we know today is that there's, you know, depending on what data set you look at, there's anywhere from 30 to 40,000 patients with a unique, you know, diagnosis code related to a paedic hypersomnia. And a small, a small percentage of those are actually being treated with the only FDA approved drug today. We think moonlight offers a really great option for them as well. So, thank you. Thank you.
Speaker Change: In this population to get a patient or I guess I can't give it to switch.
Speaker Change: And convince them to meet the pediatric patients off of therapy.
Speaker Change: May not be as good as <unk>, but.
Speaker Change: Named minds, maybe adequate perhaps compared to what they've tried in the past.
Speaker Change: And then suddenly.
Speaker Change: Given the weight based dosing there.
Speaker Change: Much of a focus with the pediatric population would be for the sales force given the runway in the population.
Brandon Foulkes: Thanks, Brian. Richard, do you want to comment on the people?
Speaker Change: Thanks, Brian Richard do you want to comment on the pediatric opportunity yes.
Richard Kim: Yeah, you know, as Greg said earlier, the opportunity is about 5% of the overall box space marketplace today. For us right now, when we think about sales versus coverage, the vast majority of the pediatric patients are seen by physicians that we call on that treat both adult and pediatric patients today. So incrementally, we're only adding a few physicians who are specifically focused on pediatric sleep disorders. So I think our label will be very clear about the ability to switch patients, as it is for adults today as well.
Richard: I appreciate it earlier the opportunities about 5% of the overall occupancy marketplace today.
Mark Goodman: Our next question comes from the line of Mark Goodman of larynx. Your line is now open. Tom, I know we talked about, you know, kind of a question.
Richard: For US right now when we think about Salesforce cartridge. The vast majority of the pediatric patients are seen by physicians that we call on that speak both adults and pediatric patients today. So incrementally we're only adding a few physicians who are specifically focused on pediatric sleep disorders.
Mark Goodman: I don't know anything. You know, that's a free goods just how much, you know, what percent of free goods of the second quarter, maybe just the direction in there and the impact it's. And just more broadly on the market, what's your sense of the number of patient, like, you know, how much did it grow versus, you know, for your launch? Yeah, Marc, you're a little bit breaking up. So I just want to make sure, your first question is, I believe the patients who are on free product, right, relative to the total.
Speaker Change: So I think our label will be very clear about the ability to switch patients as it is for adults today as well and we've just heard from two specific feedback from providers and families about how this could really be a change or for their foundries because remember it's not only the patients who have to wake up it's generally the entire family that's disrupted during the middle of the night.
Richard Kim: And you know, we've just heard consistent feedback from providers and families about how this could really be a changer for their families. Because remember, it's not only the patient who has to wake up; it's generally the entire family that's disrupted during the middle of the night.
Mark Goodman: And the second is just how would you, how would you, the market, the market trend. So, yeah, how much of the market's changed exactly, you know, before you lost 10 pounds. Yeah, I know, thanks for the question, Marc. You know, for us, where we are, we're right in the wash right now, we think the single most important thing that can happen is HCP's and patients get experience with the price and the feedback that far has been terrific.
Richard Kim: So it's a modest opportunity as far as numbers or percentage are concerned, but we think it's a very important opportunity for us to sort of execute on going forward as well. So we're super excited about the opportunity that lays ahead. Yeah, I think the only thing I would add is that I don't think where we think of going into the market for pediatric patients is going to perform any different than how we see adults today.
Speaker Change: So it's a modest opportunity as far as numbers or percentages concern, but we think it's a very important opportunity for us to sort of execute against going forward as well. So we're super excited about the opportunity to add yes, I think the only thing I would add is that.
Speaker Change: I don't think today, where we think it is growing the market for pediatric patients going to perform any different than how we see adults today and that physicians see patients in the ordinary course, when they come in for their follow up whether it's <unk>.
Richard Kim: And that, you know, physicians see patients in the ordinary course; when they come in for their follow-up, whether it's three times a year, twice a year, whatever it may be, the opportunity to discuss womb rights will come up. And of course, it's imperative for us, which we'll be doing, our related investment in marketing and awareness campaigns for the pediatric population to try to spur patient activation accordingly from a parent's perspective. But, you know, again, that's no different than I think we see the adult population today.
Richard: Three times, a year twice a year or whatever it may be that the opportunity to discuss room rates will come up and of course, it's imperative for us, which we'll be doing is doing are related investment in marketing and awareness campaigns to the pediatric population to try to spur patient activation accordingly from a parent's perspective.
Mark Goodman: And we really see free products as an investment in our launch overall. Now, what we hear from other specialty sort of chronic product launches is sort of free products being used in about that 20 to 25% range of total patient usage. We think that's a pretty good proxy when you think about things. And for our business, over 80% of our business is commercial today, I think ready commented that part of our business, we would anticipate getting more of our team, especially Medicare patients being kicked up in 2025.
Richard: But again, that's no different than I think how we see the adult population today.
Brandon Foulkes: Great, thanks. And then maybe just a follow-up on the discontinuation rate. If I look at the metrics you gave, and thanks for the additional metrics, it looks like we had an additional 700 patients initiate therapy during the quarter, and an additional 500 patients on therapy at the end of the quarter. Is that a fair way to kind of... Think about, obviously, there's a lot of moving pieces around that, but just at a higher level, do you think that at this stage, for every 700 patients starting therapy, 500 will stay on Lumrise?
Speaker Change: Alright, Thanks, and then maybe just.
Speaker Change: A follow up on the discontinuation rates.
Speaker Change #103: And if I may.
Speaker Change: Look at the metrics you gave in thanks for the additional metrics. It looks like we had an additional 700 patients initiate therapy during the quarter and an additional 500 patients on therapy at the.
Mark Goodman: So we do believe that things will improve breasts. But once again, it really comes down to us, us doing free product as an investment and getting HP and patient experience. And ultimately, we are also able to convert some of these patients using our programs either our bridging program or temporary system program, our permanent affordability program onto reverse patients as well. And as far as the overall market size is concerned, we've had with our claims data provider, it's been a little bit measuring the second quarter for overall, but what we see overall in the marketplace market is a few good leading indicators for what, why we believe the market is going for oxidates.
Speaker Change: And a quota.
Speaker Change #101: Is that a fair way to kind of.
Speaker Change: Think about obviously, there's a lot of moving pieces around that but just at a high level.
Speaker Change: Do you think that at this stage <unk> 700 patients starting therapy 500 will stay on them right.
Richard Kim: Yeah, no, thanks, Brandon. You know, right now, we're still relatively early on in the launch, and as we know historically, more discontinuations tend to happen earlier or after patient initiation. So we haven't really sort of got our full base of sort of steady-state, longer-term usage yet. So we think discontinuations earlier on in launch may be higher represented than they are going to be later on in launch. So I don't think we've quite gotten to our steady-state, so it's a bit dynamic right now, and, you know, it's hard to sort of say exactly what happened in the past will reflect the rates going forward. We know that there will be more discontinuation rates over time, but the rates may be different going forward.
Speaker Change: Yes, no. Thanks, Brian right now we're still relatively early time watched and as we know historically more of a situation tend to happen earlier after a patient initiation. So we haven't released sort of got our full base that sort of steady state longer term usage. So we think.
Mark Goodman: The first is the previous to discontinued patients to quite some of the oxidates, we believe are uniquely a new might opportunity and we're getting a good portion of those starting and initiate therapy with the right. The second is we are getting more new denied, naive patients finishing on the right that's consistent with the market research that we've heard prior to launch that we might open the doors for more new to oxidative patients considering going on to an oxidative.
Speaker Change: This situation earlier and launched maybe high represented then they are going to be later on in launch. So I don't think we've quite we've got towards steady state. So it's a bit dynamic right now and.
Speaker Change: It's hard to say exactly what top of the pack will reflect the rates going forward. We know that there will be more discontinuation rates over time, but the rate may be different going forward.
Brandon Foulkes: Thanks, very helpful. And the last one, if I may, just on IH, you know, Zywave does have the potential to dose once daily. You know, do you believe Lemurise will take market share from both the twice nightly patients and the once nightly IH patients? And if so, do you have any sense of which percentage of patients that would be? IH patients are currently making use of that once-nightly dose of Zywave, and that's it from me. Thank you.
Speaker Change: Thanks very helpful. And then last one if I may just on IH.
Mark Goodman: The third thing that we talked about earlier with that we are getting unique prescribers who have never prescribed a person or an oxidative that are not prescribing new might as well, so we view these as all really positive signs that the market is growing beyond where the person or an oxidative market was. Yeah, I just want to emphasize a couple of points, Richard made again, I'll just restate it. Number one is that is that we don't think lume right is going to dramatically be different in terms of its percentage of free drug versus kind of other products, but what we've seen, which I think is a really positive is we've seen patients when a coverage policy decision comes into play as Richard noted, we've been able to convert them to an essence of paying patients, so that's something that our team is focused on and will continue to do that.
Speaker Change: And as always does have the potential to dose once nicely.
Speaker Change: Do you believe them rise will take market share from both the twice nicely patients in one slide Nike IH patients.
Speaker Change: And if so do you have any sense of what percentage of patients IH patients currently you're making use of that once nightly dosing Gonzales and thats. It from me. Thank you.
Richard Kim: What we know right now from the Zywave label is that 23% of patients took a single dose. But keep in mind, those were patients from the beginning of the study who were unable to take the two doses that the study started off with. And also keep in mind that the maximum dose of those patients is six grams that they can take. However, we know that oxybate use for adults tends to migrate more towards seven and a half, and nine grams of total usage.
Speaker Change: Thanks Richard.
Speaker Change: What we know right now from the Zywiec label is 23% of applications, where did take a single dose keep in mind those are patients from being steady who are unable to take the two doses that the study started off with and also keep in mind that the maximum dose of those patients is fixed ramp that they can take.
Speaker Change: That ought to be used for adults, hence the migrate more towards 759 grams, a total usage.
Mark Goodman: And again, I think the way I think about the notion of what's happening with the market because kind of the secondary data sources are a little choppy right now is that patients that we're getting added to lume rise sources of business, we're getting added to lume rise as new stars. They're not in the nominee of kind of the legacy market right those patients weren't there before, so from our perspective, that is a great sign in terms of what are the prospects, you know, one year into launch of what the potential future holds for our ability to really grow this market.
Richard Kim: So it's really one of the predominant things that we hear about our opportunity in IH is that a lot of patients are incapable of waking up to take that second dose. And we believe that the opportunity for lumaries is quite substantial from both those patients who are taking two doses and those patients who may be taking a single dose to potentially have a higher therapeutic option in lumaries as well. So we really sort of see the opportunity within the existing oxybate patients today and, as Greg mentioned before, to grow beyond that as well.
Speaker Change: It's really one of the predominant things that we hear about our opportunity and IH is that a lot of patients are incapable of waking up to take that second dose and we believe that the opportunity for alere minuses quite substantial from both of those patients who are taking two doses and those patients who may be taking a single dose to potentially have a higher therapeutic option in their minds as well.
Mark Goodman: Thanks.
Speaker Change: We really sort of see the opportunity within the existing expectations today, and as Greg mentioned before to grow beyond that as well.
Brandon Foulkes: Great, thank you very much, and congratulations on the strong execution again.
Speaker Change: Alright, Thank you very much and congratulations on the strong execution again.
Mark Goodman: Thanks, Mark.
Brian: Thanks, Brian.
Gregory Davis: Thank you. I am showing no further questions at this time. I would now like to turn it back to Greg Davis for closing comments.
Operator: Thank you.
Speaker Change #101: Thank you I'm showing no further questions at this time I would now like to turn it back to Greg Davis for closing comments.
Fatma: Our next question comes from the line of Ashwani Verma of UBS. The line is now open. Hi, good morning. It's Fatma on behalf of Ashwani at UBS. Thanks for taking a question. Just like very quickly. Can you talk about what you are seeing in terms of discontinuation persistence rates? Any change from what we've seen early in the launch? And just a quick second question. Are you seeing any impact in the second quarter from Zyron being removed from certain formula?
Operator: Thank you and thank you everyone for your time and joining us today on our second quarter 2024 earnings call. We wish you all a great day and look forward to providing updates in the future.
Greg Davis: Thank you and thank you everyone for your time and joining us today on our second quarter 2024 earnings call. We wish you all a great day and look forward to providing updates in the future.
Operator: This does conclude the program. You may now disconnect.
Speaker Change: This does conclude the program you may now disconnect.
Fatma: Thank you, Larry. Thank you. Thank you very much, Richard. Yeah, no thanks for the questions. So as far as it comes to discontinuations, what we see holistically is, Lumeris has lower discontinuation rates in the first generation of offsibes. When we compare that at time, mass culprits of patients wrote the launch. What we do know historically is discontinuation rates for oxides tend to be higher earlier in treatment. And they tend to subside over time.
Speaker Change: Okay.
Speaker Change: [music].
Fatma: And that's also what we see with Lumeris. Once again, lower than the first generation of offsibes. And the discontinuation rate is probably driven a little bit more from naive patients and previously discontinued patients that do have a higher discontinuation rate than the switch patients do over time. But we've also learned a lot like we have an other components of our launch. We're learning a lot of from ACTs and patients. We're learning how to intervene differently when to intervene, how to intervene, how to specialize things depending on which patient site.
Brian: Okay.
Brian: [music].
Fatma: So we know that every product does have dropouts. And that's true of any product medication, but we were really hard to get these patients started. And we're going to be working really hard to make sure that the right patients stay on therapy as well. And as far as your second question about the impact from the siren. Yeah, I mean, clearly there was some changes in some formlies that have to grow this year.
Fatma: We did benefit from some of those patients going on, Lumeris. But we also know that our value proposition is very strong again, all opportunities, quite something off the base. So those patients, as we mentioned before, remain important source of our business as in addition to attitudes that segments as well as they go forward.
Richard Kim: Great. Thank you.
Warren Livnatt: Our next question comes from the line of Warren Livnatt of H.C. Wainwright. Your line is now open. Thanks. I appreciate it. Clearly, you have plenty of room to grow in your H.C., but you're pretty aggressively pushing into I.H. And I have a couple questions there. First, you know, what's the reasoning behind trying to get in there right away now while that market is maybe not as developed? Is there any reason to maybe let your competitor with twice nightly continued to make the investments and do the legwork, the probably the hard tougher lifting to grow that market first and get oxybate established as a therapy versus getting in their ASAP.
Warren Livnatt: And also, do you believe you have an IPS side of freedom to operate there, given I think there's some different labeling on the side and some of the arguments your competitors making on that front in court. And I have a follow up thing. Warren, you know, whatever the competitor is doing, they're doing right from that perspective, but it's clear to us and our feedback from physicians and patients that there is an unequivocal need for moonlight in this category in this patient population.
Warren Livnatt: And we're not going to wait for someone else to do whatever they're going to do to serve this community and help expand and build our franchise. And regardless of what's in their label or what arguments they make or don't make, it doesn't matter to us because we believe we're going to introduce moonlight to the patient population. It will be well received, it will serve and have its rightful place and has the opportunity to make a difference and argue these are the market leaders in this category as well.
Warren Livnatt: So we believe we have full rights to operate accordingly and at the end of the day, the market has spoken to us in the form of patients and physicians who say, get us moonlight as fast as you can as what we're trying to do. Okay, and it's really impressive that you guys are projecting adjusted break-even next quarter, and I think OptX is actually lower than I had modeled, excluding that item this quarter.
Warren Livnatt: Can you just talk about, you know, you're growing revenue really rapidly, OptX not so much or at all now, how does that look going forward, you know, are you right sized for continued dramatic growth from here, you know, IHSI, or do you think you need to invest more by this product, along with revenue, and also I have a, here's a cash conversion going forward too, obviously, and it's not surprising, accounts receivable are accumulating as the product grows rapidly, but do you expect that to be reversed in the second half? I'll save the second question for Tom, in terms of your comment about, do we need to invest more on the launch, here's how we would describe, again, we're constantly valuating our source of business and where opportunities are to try to accelerate the launch of boom rights.
Warren Livnatt: I would say that we are generally well deployed and well-resourced to maximize the primary opportunity in the boom rights, but we are not the least bit shy of deploying more capital or investing in opportunities if we believe it has an opportunity to really grow the both the speed and the peak of what boom rights can achieve from that standpoint. So if something we're always looking at, we'll point to the comment that we made earlier today that we're seeing patients go on boom rights from physicians who we are not actively calling them.
Warren Livnatt: So, you know, we've been trying to understand that and what are the profile of those physicians, and is there an opportunity to, you know, to pursue that more aggressively and accelerate that segment? We believe, we've always believed longer from that was going to be something we were going to pursue over time, but it has moved faster than picking maybe than what we had assumed, which we think is positive, and it's something we're looking at.
Warren Livnatt: So I think at the end of the day, it doesn't change our outlook in terms of, you know, our view on profitability and generating operating income in the second half of this year and going forward, but it does, it is something we're always looking at because at the end of the day, maximizing boom rights is our primary objective. Yeah, Oren, you know, thanks for the question. We believe we're going to hit cashflow break even this year.
Warren Livnatt: You picked up on a key point, and it's not surprising that as we grow, our working capital will increase primarily in the form of the cash receivable. But when you see sitting on the balance sheet of June 30th, we'll convert to cash in Q3. Perfect, thanks. I appreciate it. We'll follow up. Thank you, Oren.
Gregory Divis: Thank you. Our next question comes from the line of Miriam Bilkidi of Flavsaya Capital. Your line is now open. Thank you, and we can grab on the quarter in launch progress. Just a quick question for me. For the Safe 3-IH study, how should we be thinking about success here? And how do you think lumerizes performance will compare to that as shared from the ID approved product? Well, again, and I'll make some comments in general, feel free to weigh in.
Gregory Divis: I think at the end of the day, we have an excellent proxy in terms of narcolepsy, in terms of how lumerized performance in our clinical trial relative to the first-generation oxivates, right? We believe that gives us high confidence that lumerized will be successful in our NIH trial that we've initiated. So we're highly confident that will demonstrate highly statistically significant benefits to patients, and from that standpoint, we remain highly confident. Do you want to add to that?
Gregory Divis: The only thing I will add is that the enthusiasm from the investigators who are participating in this trial certainly underscores everything that Greg has said. There is a long overdue on that need to be able to provide an extended release form of sodium oxivate for NIH, which only lumerize will provide if it's a proof. Thank you for taking my question. Thank you.
Matthew Kaplan: Our next question comes from the line of Matt Kaplan of Jordan Bergthelman, your line is now open. Hey, good morning guys, and congrats on the strong court results. Just to stay on the IH theme a little bit, can you talk about maybe a little bit early since you just started the trial, but the timeline for the phase three, and then also the regulatory pathway. Do you think you'll need two studies, or will one be sufficient for an NDA file?
Matthew Kaplan: I'll take the first part of that, and Jen, feel free to weigh in on the second point. Matt, I think you made a good point, which is that it's early in the trial. We're just getting our sites initiated, our early sites initiated. We haven't reached our, let's go our full run rate of steady state. We're very pleased with the fact that in a very short order from a site initiation, we've seen patients move into pre-screening and the patients go on there, go on treatment.
Matthew Kaplan: So we're, by the early data points, we're excited about that. We haven't reached our, if you will, it can take a while before our full capacity. So I think it's difficult to project how long we think it's going to take. We've always said that we believe the best proxy right now is kind of how long it's taking the other products, the other activate products and get through their, through their phase three, and that was, which is called 15 to 18 months.
Matthew Kaplan: We think that's the right proxy for us now. And to be clear, our assessment, our assumptions are on that changes. We'll be sure to communicate accordingly, you know, as, you know, as and when we're up and running more it kind of full steam and steady state.
Matthew Kaplan: So in terms of regulatory pathway, yeah, sure happy to come into that. We're very pleased with the engagement that we've had with the FDA. This will be a supplemental new drug application. And of course, there's a prior precedent where there was only one digital trial to achieve approval in idiopathic hypersomnia. So we very much believe that our pathway as well. Great. Thanks. Thanks for having me. Thanks. Thank you.
Operator: As a reminder to ask question, you'll need to press star one one.
Brandon Folks: Our next question comes from the line of Brandon folks of Rodman and Rinshaw. Your line is now open. Hi, thanks for taking my questions and congratulations on a very good quarter. Maybe just to follow that from earlier questions for me. Coming back to the pediatric population, how does the educational awareness compare in this population to get a patient or, I guess, a caregiver to switch and convince them to move a pediatric patient or a therapy that may not be as good as memorized, but in their minds, maybe adequate, perhaps compared to what they've tried in the past.
Brandon Folks: And then, simply, you know, just given away based dosing there, some sort of focus with the pediatric population B for the sales force, given the runway in the out of population. Thanks, right. Richard, do you want to comment on the pediatric average? Yeah, you know, as I said earlier, the offer is about 5% of the overall off speed market space today. For us right now, when we think about sales force coverage, the vast majority of the pediatric patients are seen by physicians that we call on that speak both adults and pediatric patients today.
Brandon Folks: So, importantly, we're only adding a few physicians who are specifically focused on pediatric sleep disorders. So, I think our label, we very clear about the availability to switch patients as it is for adults today as well. And, you know, we've just heard consistent feedback from providers and families about how this could really be a changer for their families, because we'll remember it's not only the patients who have to wake up, it's generally the entire family that's disrupted during the middle of the night.
Brandon Folks: So, it's a modest opportunity as far as numbers or percentages can turn, but we think it's a very important opportunity for us to sort of execute against going forward as well. So, we're super excited about the opportunity that we have to add. Yeah, I think the only thing I would add is that I don't think today where we think it's going to market for pediatric patients, it's going to perform any different than how we see adults today.
Brandon Folks: And that, you know, a position to see patients in the ordinary course when they come in for their follow-up, whether it's three times a year, twice a year, whatever it may be. That's the opportunity to discuss whom rights will come up. And, of course, it's imperative for us, which we'll be doing is doing our related investment in marketing and awareness campaigns to the pediatric population to try to spur patient activation accordingly from a parent's perspective. But, you know, again, that's no different than I think how we see the adult population today.
Richard Kim: Great, thanks, and then maybe just a follow-up on the discontinuation rate. If I look at the metrics you gave, and thanks for the additional metrics, it looks like we had an additional 700 patients initiate therapy during the quarter and an additional 500 patients upon therapy at the end of the quarter. Is that a fair way to kind of think about, obviously, there's a lot of moving pieces around that, but just at a higher level to think that at this stage for every 700 patients starting therapy, 500 will stay on them, right?
Richard Kim: Yeah, thanks, Brian. You know, right now we're still relatively early on in Washington. As we know, historically, more discontinuations tend to happen earlier after a patient initiation. So we haven't really sort of got our goal base that sort of steady state longer term usage. So we think discontinuations really are in launch. Maybe you're high-represented, then they are going to be later on in launch. So I don't think we've quite got a chance to be safe.
Richard Kim: So it's a bit dynamic right now, and you know, it's hard to sort of say exactly what's happened in the past. We reflect the rates going forward. We know that there will be more discontinuations rates over time, but the rates may be different going forward. Thanks, very helpful.
Richard Kim: And the last one, if I may, just on hi-h. You know, Zawave does have the potential to dose once nightly. Do you believe Lemrise will take market share from both the twice-nightly patients and once-nightly hi-h patients, and if they do have any sense of what percentage of patients, hi-h patients are currently making use of that once-nightly dosing on Zawave. And that's it from me. Thank you. Thanks, Richard. Yeah, no. What we know right now from the Zawave label is 23% of patients were, did take a single dose.
Richard Kim: Deep in mind, those are patients from being a study who are unable to take the two doses that the study started off with, and also keep in mind that the maximum dose of those patients is six grams that they can take. We know that Oxford used for adults hence to migrate more towards seven and a half, nine grams of total usage. So it's really one of the predominant things that we hear about our opportunity in hi-h is that a lot of patients are in chiefable of waking up to take that second dose.
Richard Kim: And we believe that the opportunity for Lyumarides is quite natural from both those patients who are taking two doses, and those patients who may be taking a single dose, to potentially have a higher therapeutic option in Lyumarides as well. So we really sort of see the opportunity within the existing Oxford patients today, and it's great to mention before they grow beyond that as well.
Richard Kim: All right, thank you very much and congratulations on the strong execution again. Thank you, Frank. Thank you. I'm showing no further questions at this time.
Gregory Divis: I would now like to turn it back to Greg Davis for closing comments. Thank you, and thank you everyone for your time and joining us today on our second quarter of 2024 Ernie's call. We wish you all a great day and look forward to providing updates in the future. This does conclude the program. He may now disconnect.
Operator: Thank you.