Q4 2024 Tarsus Pharmaceuticals Inc Earnings Call
Yeah.
Okay.
Good morning, and welcome to talk to this year and 2024 financial results Conference call.
As a reminder, this call is being recorded.
Speaker Change: At this time I would like to turn the call over to David Nakasone head of Investor Relations to lead off the call. David you may begin.
Speaker Change: Thank you before we begin I encourage everyone to go to the investors section of <unk> web site to be the earnings release and related materials, we will be discussing today.
Speaker Change: Joining me on the call. This morning are Bobby as Damian, our Chief Executive Officer, and Chairman <unk> <unk>, our chief commercial officer.
Speaker Change: Hey, Sheryl von <unk>, our Chief operating officer, and Geoff Farrell, our Chief Financial Officer, and Chief Strategy Officer.
Speaker Change: I'd like to draw your attention to slide three which contains our forward looking statements. During this call we will be making forward looking statements that are based on our current expectations and beliefs. These statements are subject to certain risks and uncertainties and our actual results may differ materially I encourage you to consult the risk factors contained in our SEC filings for additional detail.
Bobby: With that I will turn the call over to Bobby.
Bobby: Thank you Dave Good morning, everyone and thank you for joining us.
Bobby: 2024 was a remarkable year for <unk> by any metric not.
Bobby: Not only did we exceed the lofty goals, we set for ourselves with extending we also continued to advance our robust pipeline of other potential category, creating therapeutics.
Bobby: <unk>, a clear path forward to becoming a next leader in eyecare.
Bobby: In 2024, our first full calendar year of extended in the market.
Bobby: We generated more than $180 million and net product sales and delivered more than 163000 bottles of <unk> 70 to patients even more exciting. We believe we are only beginning to scratch the surface of our ability to serve the millions of Americans with them and Xbox varieties, our DB that could immediately benefit from extended.
Bobby: Much of our success is due to the tenacious effort of our sales force, which we expanded late last year from 100 to 150 sales representatives and leaders.
Bobby: With the expanded sales team activated in Q4, I am proud to say that more than 15000 of our target eyecare physicians or ecp's are now prescribing extending.
More importantly, and based on the positive patient outcomes are ecp's have seen within their own practices. The majority are moving more rapidly along the prescribing continuum from monthly weekly daily prescribing.
Bobby: Ease of access has also been a critical success factor.
Bobby: Thanks to the stellar work of our market access team commercial and Medicare coverage of extended now extends to more than 90% of potential patient lives.
Bobby: Finally, we generated seminal data among <unk> patients with myeloma grand disease or Mgd.
Bobby: Demonstrating that extent be delivers both profound improvements in objective measures of disease and in patient outcomes like fluctuating vision.
As you know I'd like to get out in the field as often as I can and during my most recent visits I heard from Ecp's again and again.
Bobby: <unk> continues to deliver great results for patients.
Bobby: There is no shortage of patients who in their practices.
Bobby: The insurance coverage, we secured makes it easier and quicker to prescribe.
Those who have seen the mgd data said gives them yet another compelling reason to treat Andrew.
Bobby: And remember we are just getting started there as well.
Bobby: On top of all this we are already beginning to see the patient impact of the direct to consumer or DTC advertising campaign, we launched late last year.
Bobby: And while the launch of extent, we continues to accelerate we're just as excited about what's next for <unk>.
Bobby: Earlier in this quarter, we introduced the next potentially transformer category in Eyecare ocular rosacea.
Bobby: Much like DB ocular rosacea is a chronic progressive disease caused by mites we've.
Bobby: We've learned just how pervasive this disease is from our Ecp's, who say they see it in their practice all the time.
Bobby: Leveraging the proven blueprint, we've established with <unk> and our ability to target the root cause of disease. We believe we can bring another transformational product to the millions of patients impacted by this disease.
Bobby: We plan to initiate a phase II trial of our ophthalmic gel formulation CPO four later this year.
In addition to Acuras Asia, we are also advancing our Lyme disease prevention program.
Bobby: The FDA recently confirmed a clear regulatory path forward for this program and we plan to initiate a phase II study in 2026.
Bobby: With our established ability to create new categories and exceptional leadership team and many opportunities ahead of US I have no doubt 2025 will be even more impactful for <unk> central patients.
Speaker Change: With that I will turn the call over to our Chief commercial Officer Aziz Motorola for more details on our commercial progress.
Aziz Motorola: Thanks, Bonnie it was indeed, a phenomenal year and I am so proud of all our team has accomplished including setting a new standard in product launches as noted we've delivered what we said we would do and more.
In addition to addressing the unmet needs of hundreds of thousands of patients. We delivered on the key elements of our strategy that have been core to our success education ease of access evidence and of course execution.
Aziz Motorola: Among the key drivers that move Ecp's action in 2024, with our Q3 sales force expansion, which has enabled more frequent visits to our target ecp's to reinforce the benefits of extending and motivate them to look for DB in every single one of their patients.
Aziz Motorola: With this expansion we now have one of the largest sales forces in eyecare more importantly, we are consistently hearing from ECP about the quality of talent on this team all of whom have helped reshape the practice patterns of more than 15000, Ecp's a pretty remarkable feat in my book and.
Aziz Motorola: And now they are focused on turning this broad base of physicians into routine prescribers.
While it is still early in our journey in the coming quarters, we expect to realize the full potential of our sales force and our top prescribers are telling us that they are not even close to reaching maximum capacity on the number of patients within their practice they can help with extending.
Aziz Motorola: And with more than 90% of all commercial and Medicare lives covered we have eliminated the majority of access hurdles, enabling ease of prescribing for physicians and ease of access for patients.
Aziz Motorola: In particular, Medicare patients, who represent approximately half of the market.
Aziz Motorola: Finally, the trailblazer evidenced that demonstrates extending improves both objective measures in my bromine gland disease, and impactful patient outcomes like fluctuating vision and DB patients is expanding the type of patients ecp's can and will treat encouraging further depth of prescribing across all patient segments.
Aziz Motorola: Turning now to the other half of the equation patient awareness and activation. We recently turned up the volume on our impactful direct to consumer TV AD campaign, we launched in the fourth quarter of 2024.
Aziz Motorola: So much so that we've expanded into network television with Aaron's on major network television events, such as the Golden Globes, grantees and the NFL playoffs.
I've worked on several successful DTC campaign and the work our team has done here is extraordinary.
Aziz Motorola: This unique and memorable AD is generating both terrific media attention and an incredibly encouraging response from ECP and patients alike.
Aziz Motorola: Notably Ecp's are telling us their patients are starting to come in unprompted raising their hand for help with itchy crusty Red eyes in patients who responded to the AD with increased website engagement material downloads and utilization of our finding aydar tool.
Aziz Motorola: As we've said before every patient journey is different and it can take months for a patient to be inspired to action by an <unk> multiple times when to schedule a visit with their physician and ultimately filled a prescription.
Aziz Motorola: So while we are very encouraged by these very early indicators, we are continuing to take a methodical and stepwise approach to our network TV spend with an eye toward dialing up our efforts on a quarter by quarter basis, starting in Q1.
With all these foundational growth levers in place. Our 2025 efforts are focused on moving ecp's to become more routine prescribers of <unk> and driving further penetration across all patient segments.
Aziz Motorola: With these near and mid term growth initiatives in place, we expect to see a meaningful increase in the number of prescriptions and patients we serve.
Speaker Change: I will now turn the call over to our Chief operating Officer station in Nevada to share key updates from our pipeline.
Aziz Motorola: Sure.
Speaker Change: Thank you <unk>.
Speaker Change: In addition to the great progress <unk> and the team have made with <unk>. Our R&D team has been hard at work advancing our other potential category, creating therapeutics within our pipeline.
Speaker Change: And I'm incredibly proud of the work in the past few months alone. We have produced overwhelmingly positive mgd data in DB patients identified alkylate rosacea as an ex potentially impactful opportunity in eyecare and secured FDA guidance on a clear path forward for the possible prevention of Lyme disease.
Speaker Change: As Bobby noted we are extremely excited about ocular rosacea.
Speaker Change: Because like DB. It is caused by Democrats mites and can impact how you look and see.
Speaker Change: It can also be quickly and simply diagnosed in any standard eye exam by looking for inflammation and redness. There are key clinical features of ocular rosacea.
Speaker Change: And like Didi <unk> is a large and underserved market that affects approximately 15 to 18 million Americans with a majority of the cases caused by an infestation of demand expertise.
Speaker Change: Our strong portfolio of local <unk> based therapeutics has demonstrated statistically significant improvements in key objective measures for a range of diseases caused by Demodex mics, including Bebe Mgd and tableau postulate rosacea.
Speaker Change: And we believe we are once again poised to potentially deliver a game changing therapeutic designed to address the root cause of the disease the dominic's Mike.
Speaker Change: <unk> is a highly differentiated and uniquely payload investigational sterile ophthalmic gels, specifically designed to be applied to the eyelid and surrounding tissue.
Speaker Change: Following positive conversations with the FDA. We believe we have established a clear regulatory path forward for <unk> in ocular rosacea.
Speaker Change: The second half of the year, we plan to initiate a phase II study looking at the hallmark objective measures of the disease, including readiness and prominent blood vessels.
Speaker Change: We look forward to keeping you updated as we finalize the study design and expect to report steady results in 2026.
Speaker Change: Moving deeper into our pipeline I'm also pleased to share that we now have a clear and well defined regulatory path forward for <unk> five for the potential prevention of Lyme disease.
Speaker Change: As you May recall CPO five is an investigational oral on demand solution that targets an <unk> in fact, it takes before they can transmit that bacteria that causes lung disease.
Speaker Change: Based on both the strong phase Iia proof of concept study results. We reported in Q1 of 'twenty, 'twenty, four which demonstrated a greater than 90% deferral rate compared to placebo and locally and his proven track record in animal health. The FDA has outlined the following steps for regulatory approval of CPO five.
Speaker Change: First a phase III study in an enriched population of hundreds of participants and then our phase III study designed to evaluate the potential prevention of Lyme disease and thousands of participants.
Speaker Change: With an eye towards success in addressing a growing public health crisis that impacts nearly 27 million Americans, we plan to start the phase II trial in 2026.
Speaker Change: This will ensure ample time to prepare and train multiple clinical sites.
Speaker Change: While also allowing for potential completion of enrollment in one single peak season.
Speaker Change: With regard to the phase III study and given the sizable participant enrollment the FDA request, we reiterate our belief that this program may be best suited for a larger partner in the long term.
Speaker Change: In summary, we've got an exciting year ahead, as we work to move our robust pipeline forward and deliver meaningful datasets that have potential to change treatment landscape of some of the most pervasive conditions in the U S.
Speaker Change: With that I'll now turn it over to Jeff Farrow, Our Chief Financial Officer, and Chief strategy Officer to discuss our financial results Jeff.
Jeff Farrow: Thanks Sasha.
I'll reiterate the team's sentiment that 2024 was an exceptional year that exceeded even our own high expectations.
Jeff Farrow: For the fourth quarter and full year, 2024, we reported $66 $4 million and $181 million and extend the net product sales respectively.
Jeff Farrow: Additionally in line with our guidance.
Jeff Farrow: More than 58500 bottles at a 163000 bottles were dispensed to patients respectively.
For the full year 2024, we reported broad commercial and Medicare coverage now extending to more than 90% of our covered lives.
Jeff Farrow: And our gross to net discount of approximately 45% in line with our guidance.
Jeff Farrow: As a reminder, we recognize revenue when we ship extending from our warehouse to the distributors not on bottles received by patients.
Jeff Farrow: Turning to our 2024 P&L and in line with our expectations total operating expenses were approximately $303 $5 million driven.
Jeff Farrow: Driven primarily by the commercial and marketing costs related to the launch of <unk>.
Jeff Farrow: Gross margins were approximately 93%.
Jeff Farrow: Which includes the royalty and the amortization of milestones to Alaska.
Jeff Farrow: And finally, we ended 2024 with $291 4 million in cash and cash equivalents.
Jeff Farrow: In 2025, we anticipate strong annual growth to the extent they.
Jeff Farrow: Our expanded Salesforce continues to build momentum with Ecp's.
Jeff Farrow: Our DTC campaign drive even more potential DB patients to the ECP offices.
Jeff Farrow: And we motivate ecp's to move from monthly to weekly daily prescribing.
Jeff Farrow: Further this growth in sales is not expected to be linear throughout 2025.
Jeff Farrow: Like we saw in 2024.
Jeff Farrow: We expect modest growth in the first and third quarters due to the typical sector dynamics and strong growth in the second and fourth quarters.
Jeff Farrow: Looking specifically at the first quarter, we expect to again see the typical headwinds on scripts and net sales including.
Jeff Farrow: Higher patient out of pocket costs due to the annual resetting of deductibles.
Jeff Farrow: The impact of the holidays.
Jeff Farrow: Winter storms across the country and localized natural disasters.
Jeff Farrow: And the out of office impact of medical conferences, as well as other potential patient dynamics, all of which could impact prescriptions.
Jeff Farrow: As such we expect bottles dispensed in the first quarter to be in the range of approximately 62000 to 67000 with more robust growth expected in the second quarter as patients begin to return to the Doctor's office.
Jeff Farrow: I also want to note that in the first quarter similar to the fourth quarter third party reporting of bottles dispense continues to be higher than actuals biosimilar margins.
Jeff Farrow: Moving to gross to net discount we expect the discount to be slightly higher and in the range of 46% to 49% in the first quarter.
Jeff Farrow: And then improving to our expected steady state of the low <unk> by year end 2025.
Jeff Farrow: The slight increase expected in the first quarter is driven by the typical sector dynamics.
Jeff Farrow: <unk>, so I just touched on higher out of pocket patient costs.
Jeff Farrow: Due to the resetting of planned deductibles.
Jeff Farrow: And many patients switching to new plants.
Jeff Farrow: Continuing to the P&L, we expect to see an increase in operating expenses in the first quarter and throughout 2025 with the continued expansion of our DTC campaign and other <unk> related marketing costs.
Jeff Farrow: As noted earlier, we are seeing really strong signals that the campaign is beginning to drive action.
Jeff Farrow: US confidence to increase our consumer efforts and to expand it to broad network television, which.
Jeff Farrow: Which is expected to be in the annual range of $60 million to $70 million with a first quarter impact of approximately $15 million.
Jeff Farrow: Additionally.
Jeff Farrow: The phase two study of <unk> in ocular rosacea, which we plan to start in the second half of this year is expected to cost between seven and $10 million and will be split across 2025 and 2026.
Jeff Farrow: In summary, we entered 2025 and a position of strength and expect to see continued growth throughout the year.
Jeff Farrow: We look forward to sharing more updates with you in the coming quarters and I will now turn the call back to Bobby for final remarks.
Bobby: Thank you Jeff.
Bobby: Thank you all for making time to join us today.
Bobby: What you heard today bears repeating.
Bobby: 2024 was a remarkable year for <unk> by any standard as we moved from category creation to potential blockbuster growth.
Bobby: Served hundreds of thousands of patients in need.
Bobby: Established a category, creating blueprint that is powering our pipeline.
Bobby: And defined what it looks like to be the next leader in eyecare.
Speaker Change: Operator, please open the line for questions.
Speaker Change: Thank you as a reminder to ask a question. Please press star one one of your telephone and wait for your name to be announced to withdraw. Your question. Please press star one again please.
Speaker Change: Please standby power Q&A roster.
Speaker Change: Our first question comes from the line of French law principles with Oppenheimer. Your line is now open.
Speaker Change: Hey, Thanks, guys for the question and congrats on a great quarter.
Speaker Change: I think the.
Speaker Change: The main question.
Speaker Change: You guys touched on this but I just wanted to see if you can add a little color on how do you motivate prescribers to go from monthly to weekly daily and what are the biggest challenge is and maybe kind of.
Speaker Change: What are you seeing as youre trying to do that just to give some confidence because.
Speaker Change: And in your answer if you can touch on whether or not there's still remains in an rx market or is turning a little more like a trs just how do we get more comfort that.
Speaker Change: Physicians will be comfortable increasing from monthly to weekly to daily prescribing for their patients. Thank you.
Speaker Change: Hey, Brian could disease, I'm happy to speak a little bit to this.
Speaker Change: I think first off we've been really pleased with the trajectory we've seen through 2024 and the feedback we've gotten from physicians and patients alike. I think thats. The ultimate driver here right is how well the product works with that said, we've been very thoughtful about implementing several strategies to ensure continuous growth to drive that depth of prescribing youre alluding to.
Speaker Change: And the way to think about this is there's really four key drivers. We've identified one is the sales force expansion, we put in place at the end of last year.
Two is the increased coverage, having 90% of lives covered across the large books of business or managed care. Those two I think are very near term drivers. We've already seen some positive momentum from the sales force and we heard to your 0.1 of the biggest barriers had been access, particularly when you think about Medicare being almost half the market.
Speaker Change: These two levers the ability to get in front of the doctors more frequently the ability to open up access for all of the patients that can benefit from <unk> are really key in driving that depth of prescribing in the near term.
Speaker Change: When we look a little further out in the mid term to long term over the next several quarters. The next two drivers we think about our DTC.
Speaker Change: And the really compelling mgd data, we spoke to earlier.
Speaker Change: We know that consumers are very much motivated by the messaging here understanding the core disease the opportunity to get a solution. We just know that takes a little bit of time that the CD out a few times over make an appointment and see the doctor. So we think thats something that will drive results in the mid to long term. Similarly, the mgd data is really compelling doctors see this as an.
Speaker Change: Unity to expand the types of patients they think about and we also see this as a reason to treat across all of the patient segments. We have discussed in the past and again Thats just a matter of the doctor's hearing about the data seeing it a few times and then implementing new behaviors and practice and seeing the benefits across this patient types. So really feel good about not just.
Speaker Change: Where we ended last year, but the momentum carrying us into 'twenty five and these four drivers that will affect not just the near term, but also the next several quarters to come.
Speaker Change: And then Frank ill just add a couple contextual points. So on your point that our <unk> were.
Speaker Change: It's early days there we are.
Speaker Change: We are seeing that mid single digit rate, but.
Speaker Change: We expect that over the course of 'twenty five as patients come back and then in subsequent years, we will get to a steady state of around 20%. So.
That's how we see the long term.
Speaker Change: Just for being in the field I think what gives me a lot of confidence about the progression from monthly to daily is just that the product works so well.
Speaker Change: Here at every clinic.
Speaker Change: Obviously, we are generating more evidence.
Speaker Change: And we're educating around that but every doctor goes through that journey of try it in one or two see the great response trial more than this.
Speaker Change: Cycle the disease described will.
Speaker Change: I think constantly get us through that progression.
Speaker Change: Okay, Great and maybe if I could just a quick follow up here you talked about Mgd and it seems like this.
Speaker Change: Yes.
Speaker Change: Field at medical conferences are very important for doctors to kind of talk about their experiences and what they think of data what medical conferences can you just remind us which ones could be important to retire and sharing as it kind of the classic ophthalmology conferences and then if maybe Jeff can touch on you talked about weather.
Speaker Change: In the first quarter and stuff any impact.
Speaker Change: Impact on the La fires and just is this something thats affecting year guidance forecast just how to think about that thank you.
Speaker Change: Yes, I'll speak to the conferences I think in the eye care community in particular, both across ophthalmology and optometry conferences tend to be very impactful platform for us to reach a large numbers of physicians all at once.
Some of the big conferences as you can imagine or the Academy meetings. The Academy of Ophthalmology Academy of Optometry. Those are later in the year.
Speaker Change: There is a large optometry conference several of US are headed to later this week called the CECO conference.
Speaker Change: And then you've got the Crs conference in the spring, which is in Ophthalmology conference. So theres conferences pretty routinely almost every quarter of large and small and we've got a great presence, obviously, leveraging our large commercial and medical teams here to have a strong presence at those meetings as part of our strategy and really engaging with doctors very purpose when one of the fun things about this is if you can.
Speaker Change: Under these meetings the align around the booth still continues to be pretty robust. So theres lots of people still interested and engaged and hearing more about <unk> and the great results, we're seeing out there.
Geoff: Good morning, Frank its Geoff to.
Speaker Change: To your point, we did see some localized impact.
Geoff: Particularly in the areas you highlighted given the fires.
Geoff: So we did <unk>. We did include that in our guidance for Q1 models and then also you guys had a pretty rough winter out there on the east coast. So we've seen some disruption there primarily due to shipping and timing. There. So we have factored that into our Q1 guidance on the bottles as well.
Speaker Change: Perfect all right well. Thank you that's extremely and congrats on a great quarter.
Speaker Change: Thank you. Thank you. Our next question comes from the line of Corey Greendale with lifestyle capital. Your line is now open.
Speaker Change: Congrats on these great outcomes and thanks for taking our questions.
Speaker Change: Building off that Mgd question.
Speaker Change: What has really been the initial receptivity in the field and how should we be thinking about when.
Speaker Change: We should start seeing mgd impacting extent fee revenues is there an education component required here, where you anticipate ecp's will trial before increasing prescription rates or have you seen this more plug and play.
Speaker Change: <unk>.
Cory: Yes, Thanks Cory.
Cory: <unk> data when you think about this the most compelling parts or the fact that.
Cory: For the first time, you've got a therapeutic that shows objective benefits and the measures and Madame inland disease and also the fact that it leads us to see outcomes in patients that are very specific to some of the most important things that these patients talk about for instance, fluctuating vision.
Cory: And when you think about the physician receptivity here one they've got another objective measure, but two they can really hone in on how the patient is feeling so as you can imagine a cataract surgeon that's doing great surgery all of a sudden sees data that said treating demodex, Mike can improve fluctuating vision, that's a pretty significant incentive to think about diagnosing and treating these patients.
Speaker Change: To your point it is an educational process the data needs to be presented multiple times, we've done that at medical conferences, we have a med affair's team obviously, our sales team all of these levers, we'll get that data out there in front of the doctors over the next several quarters and I think it does take time to <unk> point earlier, the doctors here about the data theyre going to trial, it and different patient types there.
Speaker Change: Going to see the results and then they'll expand the usage. So we expect that to build over time, but everybody that we've talked to so far that seen the data has been very positive and have volatile. This that this should increase their proclivity to diagnose and prescribed detention center nobody you out in the field recently, maybe hasn't Nacho Tiv, yes, thanks disease.
Speaker Change: Early days as he's mentioned, but seeing firsthand doctors learning about the data in different settings.
Speaker Change: It's just striking to me I mean, it's all different sub specialists.
Speaker Change: As alluded to the cataract surgery glaucoma doctor, even the optometrist.
Speaker Change: The message that I hear is okay, I should be looking for Colorado more in my patients because of this data and thats exactly what.
Speaker Change: We hope to see more and more of over time.
Speaker Change: Got it that's helpful. If I could have a follow up.
Speaker Change: Kind of in the same theme.
Speaker Change: Talking about pipeline expansion into different indications earlier in the year you should plan for.
GPO foreign to ocular rosacea now, we're talking about bringing <unk> TPI <unk> forward in line can you provide some context on the impact of these programs as it relates to R&D spending Capex I know it.
Speaker Change: The phase two ocular Rosacea study, you mentioned, a $7 million to $10 million figure, which seems.
Speaker Change: Pretty reasonable to me, but what factors.
Speaker Change: Kind of driven those are internal go no go decisions here and how are you thinking about your strategy as it relates to balance investment and extend these commercial ramp with pipeline development.
Speaker Change: Particularly as we're kind of approaching cash flow positivity driven by extensive revenues how should we be thinking about timelines to cash flow positivity here in relation to all.
Speaker Change: The updates.
Sure Cory this is Jeff and great question.
Speaker Change: Really our focus on capital allocation, ensuring the success of the launch the continued success of the launch and as we highlighted we're making further investments into our direct to consumer campaign focused mainly on and expanding into network television as well.
Speaker Change: In addition to that we are really excited about the opportunity in ocular rosacea again, something thats, a category, creating opportunity and a white space.
Speaker Change: An opportunity really to help patients that don't have any other kind of therapeutic out there. So we think that is completely synergistic with our programs and as you highlighted that's about $7 million to $10 million in that phase two study spread across 2025 and 2026.
Speaker Change: As we think about the Lyme disease program. There is continued interest here from investors.
Speaker Change: But we don't.
Speaker Change: I expect in the long term is really to take this to market ourselves. We think this is probably better suited for the patients to have.
Speaker Change: A bigger partner take this but given the call point being a GP call point, we wanted to Eni care leader and focus on that so we're evaluating what a phase III study might look like but none of those costs will be incurred in 2025 and stay tuned once we get a better sense of what that clinical study might look like and whether we decide to take.
Speaker Change: That on our own or partner that is to be determined.
Speaker Change: Excellent. Thank you and congrats again.
Speaker Change: Thank you <unk>.
Question comes from the line of velocity Prasad with Barclays. Your line is now open.
Macewen: Hi, Good morning, everyone. This is macewen for velocity and congrats on all the progress.
Speaker Change: Circling back as it relates to ocular rosacea can you just help us better understand the overlap with DB and just a real opportunity that you believe this represents and then on the commercial side I guess, just what more will be needed for our gel versus an eyedrop. Thanks, so much.
Speaker Change: Thank you this is <unk>.
Speaker Change: I'll take that.
Speaker Change: Part of it.
Speaker Change: So as we outlined earlier in the year. We are very excited about ocular rosacea is a new category of creating disease and as Bob alluded to earlier. This is really a taking the blueprint from our exemplary development and Theres. So many parallels to how we develop the <unk>.
Speaker Change: In that.
Speaker Change: This is also caused by Amit. This is all this has a very clear.
Speaker Change: A diagnosis that.
Speaker Change: On the ACP can do very simple diagnosis, and it's highly prevalent as our own ecp's have told us so.
Speaker Change: Just from the standpoint of link.
Speaker Change: A link to Dominic's causation.
Speaker Change: That is going to be some some overlap between these two patients but the treatment for ocular rosacea is very distinct is a distinct disease and we have a tailored product that's all <unk>.
Speaker Change: Played differently. It's the objective measures are going to be.
Speaker Change: And so this is a distinctly different disease an indication that.
Speaker Change: Will will.
Speaker Change: Will be looked at as an independent statement. So that's how we look at it and in terms of the commercial impact of gel versus.
Speaker Change: <unk>. This is again like I said this is a distinct application is applied in different areas.
Speaker Change: <unk> as you know is a topical eyedrops dizzy.
Speaker Change: Designed to.
Speaker Change: To be <unk> and then the <unk>.
Speaker Change: <unk>, which is more of an island.
Speaker Change: <unk>, but.
Speaker Change: <unk> application is on the island and the pay all hospital region Periocular region. So its application is different and the indication is significantly different.
Speaker Change: Thanks, so much.
Speaker Change: Thank you. Our next question comes from the line of Jason <unk> with Bank of America. Your line is now open.
Speaker Change: Hey, guys.
Jason: Thanks for taking my questions.
Speaker Change: One online.
Speaker Change: I'm just trying to get a sense of how after your FDA discussions what's the range of how big a prevention study.
<unk> III would need to be.
Speaker Change: Maybe some of this is.
Speaker Change: Too early to say because of the phase II, we're informed study sizing and Thats why im asking about a range.
Speaker Change: Just trying to understand the size of the investment you mentioned this is like a GP call point, but from a strategic partners perspective, just wondering how large and costly.
Speaker Change: Our pivotal program might be there and then on <unk>.
Speaker Change: Can you break out for the Ecp's what percentage at this point would you say are low prescribers I'm, just trying to get a sense of how the.
Speaker Change: I guess the call universe of 15000 Ecp's.
Speaker Change: Nets out between low prescribers and it's a high prescribers and it can be just directional I'm just trying to get a sense of what that mix is.
Okay.
Speaker Change: Yes.
Speaker Change: Thanks, Jason This is <unk> I'll take the first part of the question on the line and then pass it onto us easily for the commercial question.
Speaker Change: So as you rightly pointed out we we got a very clear feedback very engaged FDA on.
Speaker Change: Providing us feedback needed to understand how we want to keep your Ohio for Lyme disease prevention as we alluded to earlier this is a.
Speaker Change: The tablet on demand.
Speaker Change: And the mechanism is to fill that takes before it can transmit the bacteria that causes lung disease, so very distinctly different from other.
Speaker Change: Potential treatments that are in development.
Speaker Change: Also as you pointed out the phase II study is really going to be the driver on how the phase III design is going to look like.
Speaker Change: Because of the distinct mechanism and because of being an oil equivalent.
Speaker Change: Really.
Speaker Change: <unk>.
Speaker Change: The design of the phase two study that we are.
Speaker Change: Importantly, the FDA discussed with the FDA and enrich patients and designing it in a specific way is going to give us a lot of.
Data as well as.
Speaker Change: Close to I don't how will how do we design the phase III, what type of patient population and on all of that is yet to be decided.
Speaker Change: What we know is that for phase III of VA, clearly guided us to a field study that that'll be in thousands of patients and we just have to layer all of the other information to then design a study that is going to drive the costs so more to come.
Speaker Change: We're really focused on looking at the phase III.
Great and then Jason I'll speak to your question around the prescribers I think it's generally pretty early if you think about 2024. It was the year of getting the broad base of prescribers to trial, the product and even in the fourth quarter, we're adding significant new numbers, sorry, a significant number of new prescribers to the base. So for those doctors, we don't know were there.
Speaker Change: Our long term prescribing habits are going to lie they are just getting their initial experiences and quite frankly towards the end of the year one of the rate limiting steps. We saw was our sales force being able to get to these doctors. So we did expand our sales team and then obviously now with full coverage, we really open up the funnel to different types of patients and ultimately different types of practices.
Speaker Change: We've got the sales force out there, making more calls getting in front of the Doctor and those doctors start to get those initial patients and then start to see additional types of patients that can add to we will see that deeper adoption and I think as we get into 2025 and drive that depth of prescribing will have a much better sense over time of the true distribution, but I think we put the levers in place.
Speaker Change: To be able to drive that depth of prescribing and see that over time.
Speaker Change: Okay.
Speaker Change: Thank you.
Speaker Change: Our next question comes from the line of Oren Loopnet with H C. Wainwright. Your line is now open.
Oren Loopnet: Thanks for taking my questions and pardon me I've got this cough going around.
Speaker Change: Yes.
Speaker Change: I wasn't planning on asking about CPO five because that's still a ways off but.
Speaker Change: Did catch my noticed that you've repeatedly said on demand to this therapy, which I guess in my mind begs. The question are you contemplating potentially people taking this product after tick fighter exposure will take notice or is this fundamentally a prophylactic treatment.
Speaker Change: Maybe taken seasonally or before outdoor activities and then I actually have mark.
Speaker Change: For modeling question.
Speaker Change: Thanks, Lauren Yeah, when we say on demand the way the drug works as an oral drug as we mentioned.
Speaker Change: The drug is rapidly absorbed and it gets too.
Speaker Change: It gets to a level that is.
Speaker Change: Within hours and so it can be so the way we are contemplating is all the things that you said which is.
Speaker Change: As a prophylactic for.
Any planned outdoor activities for <unk>.
Speaker Change: For those outdoor enthusiasts are vacationers.
Speaker Change: And then and then there is also on a seasonal basis for those who live in the endemic areas to take it to more prophylactically.
Speaker Change: We haven't really.
Speaker Change: What we will know from the data when we when we do the studies is how quickly can they take after a potential tick bites.
Speaker Change: But it's it's really a very fast acting drug.
Speaker Change: That can prevent the predicted patients within hours and that's how we define on demand.
Speaker Change: Yeah.
Speaker Change: Okay.
Speaker Change: Thanks.
Speaker Change: Just to get to the more nitty gritty stuff.
Speaker Change: Fourth quarter, if my math right. It looked like there was pretty meaningful channel.
Speaker Change: Shocking.
Speaker Change: I assume.
Speaker Change: Wholesaler activity ahead of price increases and just maybe ahead of DTC can you maybe quantify that or if not can you at least talk about as we prepare for Q1 and not wanting to get that wrong is it possible, we'll actually see some work down work through of inventory in Q1, following the sort of ramp up at the end of the year.
Sure and I'll take that this is Jeff actually we did not have any stocking inventory above and beyond what we've been seeing over the last quarter couple of quarters, it's been primarily hovering around two five weeks.
Speaker Change: Inventory and that was consistent for fourth quarter. So we don't expect any impact of that trickling over into the first quarter.
Speaker Change: Okay, I guess I was just doing some simple math of your bottles, obviously times gross to net is coming out with a closer to $62 million number I do recognize you don't.
Speaker Change: Book revenue on prescriptions.
Speaker Change: And then also on DTC, you mentioned, the $15 million impact in Q1, and I gave us a nice big headline number for that is that all incremental to Q4 or if some of that already baked into the Q4 number or is that to activate it before the end of the year. Some of that is included in the Q4 number I would think about it more like $8 million.
Speaker Change: We spent on the DTC campaign in the fourth quarter. So you would need to take the incremental 15 less the $8 million.
Speaker Change: Perfect and just a.
Speaker Change: A couple of people have touched on it I know, we're still early days here.
Speaker Change: But do you get any feedback in the field from with regards to what rates of patients are coming in it might be mid single digit overall, our low single digit overall, but for these high prescribers that have been early adopters and are way ahead of the curve here what are their patients that are having really great results.
Speaker Change: With regards to coming back for re treatments.
Speaker Change: Is that at 20%, hence your steady state number.
Speaker Change: Or is that 20% still speculation at this point.
Speaker Change: Yeah.
Speaker Change: Yes, so I think what we're seeing generally speaking as we said is sort of that mid single digit retreat in the rate overall I think if you start to break it out by the physician groups. It varies by doctors. So it's very early to tell and it's hard to quantify it exactly right. So it's very qualitative theres a couple of different metrics. You think about over time is there are some doctors that are going to actively retreat. These patients are going to say come.
Speaker Change: In six months I know, it's going to come back I am going to treat it before to US and then there is doctors that are going to say hey, let's wait till it gets to a certain level or threshold and then will retreat. So it's more of a qualitative and doctors fall in both counts. So I think we really want to lead on the objective data here over time and right now what we're seeing is a mid single digit rate, where we are seeing that start to trickle in.
Speaker Change: A little bit, but I think it's going to take some time to really get to that steady state of 20% that we're guiding to.
Speaker Change: Okay. Thanks appreciate the answers in the 20% oranges.
Remind us based on actually the one year follow up from our.
Saturn, one phase II trial, where we actually showed about a 40% recurrent so we're taking more of a real world view.
Speaker Change: You have an estimate of 20%.
Speaker Change: Alright, Thanks for the reminder.
Speaker Change: Thank you.
Speaker Change: Our next question comes from the line of Eddie Hickman with Guggenheim Securities. Your line is now open.
Eddie Hickman: Good morning, Thanks for taking my question.
Eddie Hickman: You've given one Q bottle guidance and are sticking with some confidence in the quarter over quarter dynamics. When it comes to both volume and gross to net so I'm wondering what more you have to see before providing full year guidance and are there areas of the launch where you still don't have good clarity.
Eddie Hickman: And then on the DTC impact how accurate those website visit clicks and surveys to predicting new patient starts do you see some sort of steady state capture rate there. Thanks.
Eddie Hickman: Sure ill be happy to take the first part of the question so on the guidance part.
Eddie Hickman: We evaluate on a quarter by quarter basis in terms of giving longer term guidance beyond sort of the one quarter guidance that we're giving at this point.
Eddie Hickman: Thank the unknowns right now are related to the direct to consumer campaign, both on sort of the streaming platform and then more importantly, as we think about moving into network here. So.
Eddie Hickman: Thank you.
Eddie Hickman: Probably something that we would most definitely prefer to be able to do at some point, but given some of those uncertainties.
Eddie Hickman: We feel it's a little premature to be doing that but we will evaluate them on a quarter to quarter basis.
Yeah, and then Eddie your question around the DTC metrics I think that we've seen really good directional correlation here between those website metrics in their proclivity to get a prescription overtime.
Eddie Hickman: Particularly when we think about streaming where you get a lot more robust data at the patient level I think to Jeff's point that he just made to be able to see that scale at network is going to take a little bit more time. So we feel good about the metrics youre looking at but to say there is a direct correlation of what that growth would be I think it's going to take us a little bit more time, but I think the strategy here is to build and see the results and then scale as we see.
Eddie Hickman: Those results and that's indicative of everything we've done to launch so far.
Eddie Hickman: So youre still seeing like a three to six months or a delayed impact potentially on those DTC growth.
Eddie Hickman: Yeah, I don't think we've gotten specific as the number of months I think over the next several quarters, you're going to start to see that trickle in and again, it's just a function patients need to see to add multiple times. They need to go find a doctor make an appointment and then eventually get the script. So you can think about every patient might be a little different. So there is a build over time, but we do think that we are seeing some initial good response and then us.
Eddie Hickman: We scale. This will continue to see that and if we do it and we will continue to scale the effort.
Speaker Change: Alright. Thank you congrats on the launch.
Speaker Change: Thank you. Our next question comes from the line of Andrew <unk> with Goldman Sachs. Your line is now open.
Guys. Thanks for taking our question maybe a follow up there on the DTC campaign.
Speaker Change: Maybe just given your comments that it can take patients monster or maybe even repeated exposure to these ads to be inspired to act curious how youre thinking about the anticipated duration of the DTC campaign.
Speaker Change: For you should we think that that $60 million to $70 million annual expense should be occurring on a on an annual basis from here on out. Thanks, so much.
Speaker Change: Yes, so I think the goal here is to understand and really dig deep into how the patient responds to be able to say what the long term opportunity certainly its a new market and we're the ones that are driving the education in the market to the consumer so that speaks to the lift in terms of having to see the add multiple times. They are not going to see the messaging anywhere else, but from us right.
Speaker Change: So that effort is something we want to build on and certainly if we continue to see positive response in a positive ROI. That's something we'll work to continue to feed patients into practices because we see there's so many patients. We've just scratched the surface here. So knowing that there's 25 million Americans out there theres a lot of people to educate and a lot of people to ultimately drive into the physician's office.
Speaker Change: So we see opportunity but.
Speaker Change: Clearly, we're going to do that based on metrics and positive ROI and Jeff you can speak to how we think about that investment sure and just pivoting off of adhesives comments Andre I think from a modeling perspective.
Speaker Change: We are we would recommend sort of putting that into the model on an annual basis. If you just take a look at what other companies do typically of course, we will be refreshing. The AD as time goes on bottom line, though is if we don't see a positive return year on this investment that would be something we'd reevaluate, but I think for modeling purposes. I would include that on an annual basis.
Speaker Change: Okay. Thank you so much.
Speaker Change: Thank you. Our next question comes from the line of Lachlan Hanbury Brown with William Blair. Your line is now open.
Speaker Change: Hey, guys. Thanks for taking the question.
Speaker Change: I guess I'm curious, how the sort of interaction on messaging with Acp's changes as they move sort of along that continuum from monthly to weekly to multiple times of Waco day.
Speaker Change: Sort of how your approach to that and the messaging that changes.
Speaker Change: And then.
Jeff Farrow: Maybe you should Jeff.
Last year, you were sort of surprised a few times with gross to nets ended up just curious with the broad coverage now do you have better visibility into what they should be sort of on a quarter by quarter basis.
Jeff Farrow: Yes, so I can start talking about that position dynamic of adoption. There's a couple of factors. We think about one is if you're out in the field today with our sales team Theyre, obviously touting the great coverage, we have because that opens up the funnel for the broad base of patients across commercial Medicare and Medicaid. So that's part of the discussion <unk> had great experience.
With this now we've got great coverage, you can treat more and more of your patients as that experienced build then we start to focus on the different patient types. So you can imagine it after you've identified a handful of buffer I just mentioned in your practice did you know that a large percentage of your cataract patients blepharitis and you can be screening these patients for <unk> right and those can be pay.
Jeff Farrow: That did benefit likewise, you can think about if you are in front of an optometrist are you having patients that are having a hard time staying in their contact lens lets think about this so you can think about over the course of months that conversation can evolve to each patient type with the ultimate goal to really allow the physician to cap the broadest Nat to identify these patients and the practice. So we've got a great sales team out there thats.
Jeff Farrow: Trained in and really good at driving this conversation over time and building on positive experience great. Let's talk about the next patient type, let's see success. There, let's talk about the next patient type et cetera. So there is a real thoughtful approach, we baked into our training with our sales team and I think that's going to help.
Jeff Farrow: To accelerate the adoption as we go through the quarters this year.
Speaker Change: Lachlan on your question on the gross to net sort of evolution now that we do have contracting I think we do have better visibility.
Speaker Change: We do anticipate pressure on the gross to net discount in Q1 period as we highlighted somewhere in the high 40% to $47, 49% just given the typical dynamics and then we do expect it to come down sequentially quarter over quarter to get to that low 40% ish range.
Speaker Change: On a steady state perspective, so sort of exiting Q4 there.
Speaker Change: Now on the step down where we don't have a lot of visibility at this point, we will probably have some better history. Following this year, but I would sort of think about it as stepping down quarter over quarter to getting to the ending balance of 42% to 43% on a steady state basis.
Speaker Change: Alright. Thanks.
Speaker Change: Thank you and I'm currently showing no further questions. At this time. This does conclude today's conference call. Thank you for your participation you may now disconnect.
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