Q2 2019 Earnings Call
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<unk> conferencing centre.
Its coordinator will be with you momentarily. Thank you.
None of your conference in Danbury.
Operator is fivefive 64357.
And your name.
Ed CH 80.
Argued D O R G E.
And your company name.
Era a.
I E.R.A.
Advisors.
In California.
I'd like to point out that we will be making forward looking statements and these statements involve certain risks and uncertainties that could cause our actual results to differ materially.
Please take a look at the risk factors discussed in our SEC filings for additional detail. These forward looking statements apply only as of today and we undertake no duty to update any of the statements after the call except as required by law.
I'd also like to remind you that we will be using non-GAAP financial measures, which we believe provide useful information for the understanding of our ongoing business performance.
Reconciliations of our financial results and financial guidance are included in our press release.
These non-GAAP financial measures should be considered in addition to but not a substitute for our GAAP results.
Thank you Larry.
Thank you Susan and good morning, everyone.
We have made great progress so far this year.
Further solidifying the durability of the base business in Pn, H. and H. us.
Continuing to drive new all the Gi and metabolic growth.
Building the pipeline for long term value creation and continuing to deliver on our financials.
Slide five highlights some of our recent achievements.
The us launch of Ultimates for ph is off to a strong start.
And I am pleased to report that as of the beginning of this week, we have facilitated conversion for 40% of CNH patients.
On July 2nd we have received approval of ultimate care slippage in the U.
And have already launched in Germany.
We have remained consistent with our global sustainable pricing strategy and have a best in class conversion ambition of at least 70% of patients in the first two years from launch.
Well to me with atypical Hqs filing was accepted by the FDA and granted priority review, where the target action date of October 19th and ahead of our initial expectations.
With the U.S. approval of Solaris and ammo as the in late June .
We took a major step forward in neurology.
So this is the first ever FD approved therapy for animals as the disease in which even one relapse can have a devastating consequence for patients.
We have already made good progress with the US launch and are working on prelaunch planning in the EU and Japan, where we hope to gain approval by the end of the year.
With the launch of anymore is the key and growing contribution from Gmg, we expect neurology to be our biggest franchise by patient volume into us by year end.
In metabolic Strensiq and Kanuma once again delivered double digit year over year growth.
With 18, 44 Wilson disease, we have an opportunity to bring another transformative therapy to patients and our pivotal trial remains on track to complete enrollment by early next year.
Our pipeline is progressing.
Dosing is underway in the phase three studies for ultimately are Subcu and ultimately in gmg.
We are also preparing for multiple late stage clinical trial initiation over the coming year.
Business development remains a core organizational focus that we are working to add to the three deals completed in the first half of the year kalen as the body and Zealand pharma.
Finally, we delivered very strong financial performance with 15% revenue growth and 28% non-GAAP EPS growth.
And our updated 2019 guidance reflects the momentum of the business.
All of this positions us very well to deliver against our objectives in the remainder of the year.
We also continue to look for opportunities to further build out our core therapeutic areas and expand into orders.
Aligned with our mission to bring transformative therapies to even more patients with rare diseases.
With that I will turn the call over to Paul to discuss our second quarter financial results Paul.
Thanks Ward rig starting with slide seven we reported second quarter total revenues of $1.203 billion, an increase of 15% year over year.
This was driven by Gmg continued growth in the core business and the ultimate percentage conversion.
Our non-GAAP operating margin was 58% in the second quarter in expansion of 417 basis points, driven by topline leverage and lower than planned R&D expense.
non-GAAP earnings per share was $2.64, representing 28% growth year over year.
Moving to slide eight.
Second quarter net product sales were driven by volume growth of 23%.
Offset by an FX headwind of 1% in a price headwind of 7%.
The price headwind was largely a result of a $32 million reduction to revenue for Solaris in our Canada business in the second quarter.
This is related to our ongoing dispute with the Canadian patented medicine prices review board or PM PRB related to Cerro Soleris pricing in Canada.
In may of this year, the federal Court of Canada dismissed our application for judicial review, while we are appealing the decision led to a reduction of revenue in the quarter, which includes the impact for the period from September 2017 to June 2019.
We estimate that going forward. This will result in approximately a 5 million dollar headwind per quarter.
Turning to slide nine Solaris revenue in the second quarter was $981 million with year over year volume growth of 17%.
Revenue growth in rest of world markets was negatively impacted by the Canada Judiciary order.
Enrollment in the Russia business in the US we benefited from order timing ahead of the July 4th holiday by approximately $8 million, which is consistent with prior year.
Turning to slide 10, Altamira its revenue in the second quarter was $54 million.
Recall as patients, which is a 10% benefit in the first year due to the loading dose dynamic.
On slide 11, Weve included the C. Five franchise of Solaris in Ulta Maris, combined where we saw a 15% year over year growth across paean, H atypical hqs and GM G.
Underlying volume growth in PNNT Hqs remained solid in the quarter in we expect high single digit underlying volume growth for the year for those two indications.
Moving to slide 12, Strensiq revenues for the second quarter were $141 million, representing 13% revenue growth and 21% volume growth year over year.
Kanuma revenues in the second quarter were $26 million, representing 22% revenue growth in 33% volume growth year over year.
Turning to the PML on slide 13 during the quarter non-GAAP R&D expense was $149 million for 12% of revenues.
Our non-GAAP R&D expense is much lower than we had planned. This is due to the phasing of late stage program spend which we expect to ramp up in 2020.
And we've not seen significant R&D burn from the business development deals Weve closed so far this year.
non-GAAP SGN, a expense was $256 million or 21% of revenues.
The non-GAAP effective tax rate in the quarter was approximately 13%.
The GAAP tax rate was 8%, both non-GAAP and GAAP taxes were driven by our ability to claim a foreign tax credit in the quarter.
We reported second quarter non-GAAP earnings per share of $2.64 growing 28% year over year GAAP earnings per share was $2.04.
We ended the second quarter with approximately $2.1 billion in cash and marketable securities.
I'll now turn to slide 14 for our updated full year financial guidance.
We are guiding to total revenues between $4.750 billion to $4 billion $800 million an increase from prior guidance.
This represents 16% growth year over year at the midpoint of the range.
For the combination of Solaris in North America, our revenue guidance is $4 billion $95 million to $4.130 billion.
This assumes continued momentum in GM G.
Incorporates our recent launch of animal SD in the United States and now includes the expected FDA approval in the US launch of OCA merits for each us in the fourth quarter.
Turning to metabolic star revenue guidance is $655 million to $670 million for both Strensiq and Kanuma. This includes the impact of a strategic pricing decision for strensiq in the us to support sustainability given weight based dosing.
We estimate price will be a 3% headwind in 2019 higher than prior guidance driven primarily by the Canada pricing item.
Foreign exchange impact net of hedging is expected to represent a 40 million dollar headwind.
GAAP operating margin is expected to be between 42, and 43% inclusive of restructuring and related expenses as well as upfront payments.
non-GAAP operating margin is expected to be between 55% to 56% of revenue.
non-GAAP R&D expense is projected to be 14% to 16% of revenues lower than our original expectations for 2019.
Phasing has shifted and we now expect much of the late stage program spend to accelerate into 2020, we intend to further build the pipeline and anticipate R&D spend both in dollars and as a percentage of sales to increase going into next year.
non-GAAP EPS GNS spend is expected to be 20% to 21% of revenues for full year 2019.
We expect non-GAAP effective tax rates similar to 2018.
GAAP earnings per share is expected to be between $8.13 an $8.41 in non-GAAP earnings per share is expected to be between $9.65 and $9 in 85 cents. The midpoint of this range is approximately 23% growth year over year.
We have delivered an excellent first half in well positioned to deliver on our 2019 financial goals I will now turn the call over to John to provide an update on R&D.
Thank you Paul I want to start by recognizing the significant accomplishments of the R&D organization in the first half of this year.
So here's became the first FDA approved therapy for animal SD, marking a significant milestone in the treatment of this devastating rare disease.
Ultimately this was approved for Pan Asian, both the EU and Japan and granted priority review for big atypical issues in the United States.
We continue to advance our pipeline and our dosing patients in our pivotal Alta mirrors gmg trial as well as our once weekly ultramarine subcutaneous trial.
We also added to our pipeline with three business development deals, we announced the collaboration came and bio Sciences for CA 101, inhale light chain him why doses a collaboration with Apple body Bio Sciences for 80 Y O three nine a novel anti F CRM NASA.
In a collaboration with Zealand pharma for peptide therapeutics targeting complement.
On Slide 17, you can see the breadth of our development portfolio, which currently encompasses 15 development programs across our four blockbuster pillars.
We expect clinical trial activity to ramp up towards the back half of 2017 and into 2020 as we initiate numerous late stage development programs.
Turning to slide 18, I'd like to highlight some of the key late stage programs, starting with our plans for Ulta Myris in hematology Nephrology, we are announcing today that we plan to initiate a phase three study in hematopoietic stem cell transplantation associated thrombotic microangiopathy or HFC TDMA in 2020. This provides us the opportunity to potentially serve HSC TTM any patients were very limited treatment options.
With our Ultramist once weekly subcutaneous phase three study, we believe we will be able to offer optionality for patients with hand age in a typical issues.
In neurology, our phase three study of Ulta Myris in GM GE is ongoing with plans to pursue a weekly subcutaneous bridging strategy in parallel.
We are on track to initiate a phase three trial called tumors in animal study later this year.
We plan to initiate a clinical trial in LLS early next year pending regulatory feedback.
This will likely be a phase two three study with a goal to gain early proof of concept for the role of complement inhibition in the pathogen assistant Alice.
Moving to SBA, one on one in our collaboration Mccallum Bio Sciences and plan to initiate a phase two three study in early 2020 in patients with AOL light chain amyloidosis, a rare disease with rapid progression to organ failure and high mortality.
Recall the phase one a one b program demonstrated early proof of concept with clinical benefit on cardiac and renal function in target engagement in vivo.
Turning to metabolic with Alex and 18 40 for Wilson disease, we remain on track to complete enrollment in our phase three trial in early 2000, 2018, 40 has the potential to be highly differentiated from current therapies.
Due to a 10000 fold higher affinity for copper potentially improving liver function in neuro psychiatric symptoms and significant improvement in dosing.
Finally, Halo Aoxin 18 is our lead candidate in our emerging anti F CRN portfolio.
We remain on track to manufacture sufficient supply for the 18 30 clinical programs by year end in warm auto immune hemolytic anemia, we plan to start a phase two three operationally seamless trial of 18 30 in early 2020.
In GMV given the evolving landscape, we have decided to focus our development of 18 30 on a subcutaneous formulation and will begin a trial in 2010 20 after generating some canny subcutaneous data in healthy volunteers.
Im incredibly proud of the progress made so far this year and would like to thank the global R&D organization for their tireless efforts in advancing our pipeline and portfolio strategy.
I look forward to providing future updates as our pipeline continues to build.
With that I will turn the call over to Brian to discuss commercial highlights for the quarter Brian .
Thanks, John I'll start on slide 20, with all the progress we've made with Ulta myris in the US we continue to be very pleased with the launch and our efforts to facilitate patient conversion.
As of the beginning of this week, 43% of CNH patients were enrolled in one source and 40% are on treatment with Ulta mirrors.
So we remain on a very solid path towards achieving our goal of best in class patient conversion and now believe we can reach that goal of at least 70% even faster targeting mid 2020 in the United States.
This is not only important for patients, but also reflects the strength of the ultra marathon.
Earlier. This month, we received approval for Ulta Myris in Europe and have already begun treating patients in Germany, where we have a sustainable pricing strategy as is already established in the U.S.
Similar to the global price range for Solaris, our ambition is to maintain a relatively narrow price band globally for all to mirror us.
We aspire to facilitate a rapid best in class conversion in each launch geography.
In Japan, we received approval in June and while we are waiting for the National Health insurance price listing in order to launch we're actively engaged in efforts to improve physician awareness of Ulta Myris, we anticipate patients can begin conversion in September .
Turning to slide 21, neurology represents a significant growth opportunity.
As you see on the left we ended the quarter with nearly 1200 gmg patients treated with Solaris in the us and we're still less than two years into the launch.
On the right you can see the continuum of Gmg disease severity building on our base of Solaris our goal is to expand treatment options for gmg patients with Ulta Myris in 18 30.
We believe a portfolio approach will help us to serve patients across the spectrum of disease.
Turning to slide 22, we're excited to build upon our GMT success with the recent expansion of Solaris into NN Mobile SD.
Solaris is the first ever FDA approved therapy for in Immodesty that disease in which patients live in constant fear of the unpredictable and potentially devastating effects of another attack.
As you can see on the right our phase three trial demonstrated that Solaris has a profound effect on reducing the risk of an animal SD relapse.
We've expanded our neurology field and medical teams this year, which positions us well for launch.
There are strong synergies an overlap with GM G.
But we're also targeting new call points, such as SMS centers of excellence.
With the right infrastructure in place and a sense of urgency to serve these patients I'm pleased to report that we already have a number of open cases in one source as well as the first an emo SD patients now treated with Solaris.
Moving to our metabolic franchise on slide 23, we reported second quarter Strensiq revenue of $141 million.
With our caliper age adjusted initiative, we aim to increase awareness and adoption of the appropriate diagnostic ranges for HPP, helping to support earlier diagnosis, particularly of pediatric patients.
Kanuma ended the quarter with revenue of $26 million with both Lal D and HBP, we continue to identify new patients and plan to seek reimbursement agreements in additional geographies.
This was a great and action packed second quarter, and I want to especially thank the commercial team for their hard work and dedication to bringing hope to patients suffering from our now expanded rare disease indications.
Ill now turn the call back to Ludwig for closing comments literally. Thank you Brian I'm very pleased with our 2019 progress so for that look forward to further building on this momentum.
As we strengthen our position in each of our four plug bus. The pillows. We'll also continue to look for ways to further leverage our unique and established rare disease expertise.
Looking ahead, we have a strong foundation with our base business and exciting opportunities for growth, including our expanded neurology portfolio and numerous late stage pipeline programs. We are committed to executing on our strategy with the aim to transform patient lives and create long term shareholder value.
As always I would like to thank our global employees for their dedication to our mission and the patients we serve for their continued trust in us with that we will now open the call to questions operator.
Thank you.
Ladies and gentlemen, if you have a question at this time. Please press the star followed by the number one key on your Touchtone telephone. If your question has been answered or you wish to remove yourself from the queue. Please press the pound key once again to ask a question. Please press star and then one now.
And our first question comes from Geoffrey Porges from Leerink. Your line is open.
Thank you very much and congratulations for all all of you on the programs, particularly the approvals.
I guess the Big question, Greg. This is the battle of the share price.
Youre executing strongly.
Both from a pipeline and commercially the trajectory is looking good for the new products and new indications, but yet the share prices being flat for three years.
And that probably reflects peoples concerns about pricing.
Patents and concentration of a portfolio. So as you think about what options you might have with the company.
Is there anything that you could contemplate that that might potentially generate value for shareholders or else things you could do with the balance sheet and assuming that there's not much you can say about that could could you. Just also update us on your patent appeal as well, which is proud to be overhang.
We have a lot of questions in that segment. Thanks. Thanks for that so first of all we saw.
We have a strong strategic plan and the team is doing an awesome job in executing the.
The the plan here in when you look at look at the business model on where we were a couple of years ago, where we are now I think the team really redefines what what the fundamentals of this organization is and we're going from old to new and it's only like a year and a half ago that we got the build to Meritas data, which was strong and we're moving our business from our Solaris too old to Marius business with respect to some of your questions on concentration.
IP Biosimilars.
As we execute our continued to execute on our conversion those questions are going to become less relevant because biosimilars and IP is related to the Solaris story not related to the ultimate story and as we're building that conversion.
Quarter after quarter.
Country after country, we're going to have a new portfolio that will raise different type of discussions I'm really pleased with what we've done so far we're not going to change our strategy as I said, we believe we have a very strong strategy.
We're looking at.
Strengthening our portfolio through internal innovation and as you saw that we have 17 20, which is internal assets of first one in the last two years going into ceta as well as we will continue to use our cash towards building a pipeline through external innovation.
So I think my story, if we don't change this company overnight.
The team has a very strong strategic plan, we're delivering on what we said we were going to do and.
Every quarter, we are getting stronger and stronger with fundamentals.
With respect to our questions on IP.
There is no new news on the.
On the Epo.
In Europe , no new update so beginning of September .
We should know more about composition of matter and method of use patents, but again I come back to what I. Just said that is our strategy. Our chapter two for this company is to make ultimately once the standard of care for PNM and once approved the standard of care for H.U.S.. So the topic of IP and by similar comps will become less relevant for this organization. So I hope that answers your question and lifting might call. It.
Let's see if there's anything you want to add wells said.
Okay. Thanks.
Thanks, Jeff.
Thank you. Our next question comes from Matthew Harrison from Morgan Stanley . Your line is open.
Hey, great. Good morning, and thanks for taking the question I guess I wanted to.
Focus on a couple of the R&D programs, if I could just ask about especially timelines related to SCR and.
Like those studies are now starting a bit later than you had talked about last quarter and so I was wondering if you can update us on the manufacturing issues that you hadnt been able to work through those and then what some of the drivers have been around the.
Pushing out of the timeline related to those thanks.
Thanks, Matt as John actually no change relative to what we communicated last quarter, we basically what we said when we identified is being impurity in the manufacturing process that we've addressed now.
And we've run new drug substance runs that will deliver new drug product by the end of the year. So derived product will be delivered by December which allows us to restart the program in January .
So thats consistent with what we said we do plan to go back into hemolytic anemia with phase two three operations seamless.
Design with the Ivy formulation, we're also pursuing a subcu formulation with higher concentration drug product that will also be delivered at the end of the fourth quarter for us to start dosing healthy volunteers and then.
As I indicated in during my prepared comments, we are looking at my senior gravis as well with that Subcu formulation, recognizing evolving landscape in that space and I would take the opportunity to just say that we are committed to.
My senior Gravitas, we clearly have.
Great product in severe patients with severe Mg with Solaris, we're conducting a trial now with.
Ultimately this in my senior Gravitas that does not require the failure of an iced tea Soto move further upstream in the patient journey.
Less severe patients and then with RF CRM and we have two shots on goal here, we have 80 wire threenine thats in phase one dosing is sad and mad as well as our 18 30 that will give us the opportunity to span the spectrum of all patients with my senior grabs.
Sure I mean, we are peaks.
We are looking at our options here given the fact that the ultra mirrors now is rapidly expanding to now seven new indications in total with Pan Asian atypical at US, it's serving that patient popular those patient populations very well in parallel we have a subcu program. That's enrolling now that will allow optionality for patients in our core business.
When that reads out in 2021.
It gets to market and we have a bridging strategy to expand that once weekly subcu formulation to the other indications we are pursuing with Ulta mirrors. So right now we have options in our portfolio with here with regard to see five that includes 17 20 as well as 18 10, we're exploring now the potential to go into alternative indications and.
Go into new Horizons.
Thank you.
Thank you and our next question comes from Martin <unk> Oster from Credit Suisse. Your line is open.
Hey, guys. Thanks for taking the question congrats on the continued strong operating results.
Follow up on the the kind of the pricing decision I was just curious.
So do the lowering of Canada price was worry about presents any near term risks as it creates a lower price point that could then be used by as a comparator or by other countries that are evaluating pricing or on soliris. So just curious, though could trigger potential in the near term risks around other countries repricing flares and then secondly, I was wondering if you could articulate more precisely what the international pricing vendor on services and then for Ulta Myris do you expect a similar pricing band or relatively tighter international band than you currently have with Soliris. Thanks.
Alright, Martin this is Paul Thanks for the question.
The Canada situation goes back to 2017 as I had noted its been our in our legal disclosure since that time period, we believe it's pretty localized.
Issue.
It relates to the core issue relates to whats the appropriate comparison and it actually gets involved with.
Foreign exchange rates and so on and so forth we're appealing it.
But for the time being there'll be a little bit of a headwind as we kind of marched through the balance of the year, but we do believe it's local it's a localized issue at this point Brian .
Yes, just on the second question about the Soleris pricing than we haven't quantified that but.
I mean qualitatively we've described it as a relatively narrow global pricing band and I think thats really relative to what we know in terms of.
Most other pharmaceutical products on the market, we have a global footprint similar to ours. So the ambition that we have.
And we've already taken big steps towards this with the launch of Volta Myris in the US and then most recently in Germany is with Ulta mirror as we want to have maintained a similar pricing range. So in Germany, just to be specific about what that looks like.
It is similar to the pricing in the us and so in the maintenance phase, there's about a 10% discount of Ulta myris versus Solaris.
The way, Germany looks at these patients as they have kind of more of a longer term view the blend together years, one and two and when you take that average there is essential parity with Ulta Myris versus Solaris and then when you get into maintenance and beyond.
You capture the system savings and the discount and that's that's our ambition to have that pricing range globally.
Yes, I'm going to add to that the.
The government published.
End of 28, C.A. International pricing review document solutions as part of this.
So maybe that's a good reference documents.
But what it said is that our soleris flies in the U.S.
It's not that much to from from the point Youre going to see internationally.
And maybe you have already seen to this document.
Thanks, that's very helpful color appreciate it.
Okay. The next question.
Thank you. Our next question comes from Paul Matteis from Stifel. Your line is open.
Hi, Thanks for taking the question. This is made on for Paul.
Maybe one question for Brian So Youve got almost 1200 gmg patients on Solaris.
Oh, yes, yes to a how is persistent it looks so far and then be just longer term what do you think taps the upside of Solaris Gmg is this a number that is this payers restricting use or do you think it's going be physicians being reticent to use that in a less refractory population. Thanks.
Sure well, we are really pleased with the progress that we're making so were nearly two years into launch and we've we've been very consistent reporting the numbers. So you guys can see exactly what we see.
And we continue to make progress with all the stakeholders, whether its physicians patients or payers.
Just to quantify where we are in the bigger picture.
In the U.S. Gmg refractory population, which really aligns with our regain pivotal phase three study at the high end of that there were about 8000 patients.
And as you just noted we have now achieved nearly 1200, but thats still was a pretty small number in the bigger picture, which suggests there is plenty of opportunity to go.
I think most importantly in terms of how we continue on that journey.
It's really clear that Solaris continues to deliver clinically and we see that reflected by the steady growth as well as particularly at this stage and launch both breadth of prescribing as well as.
Depth of prescribing and both of those components for all of our launches are important measures. So what this does is this reinforces at the physician level.
Their advocacy to payers so with the payer were to come back to a physician and require some form of documentation for continuity of therapy.
That reinforcing clinical delivery that Solaris is offered has only strengthened the case.
And then I would add that from a payer perspective to where we are with now both gmg and ammo SD is.
That we continue to reach out to payers proactively and the combination of that proactive communication as well as the steady growth creates one of the most important elements for payers and Thats predictability as they set their budgets going forward. So we feel really good about the progress.
Thank you. Our next question comes from sale Naidoo from Cowen and company. Your line is open.
Good morning, Thanks for taking my question and congrats on the progress just a couple around the European pet situation, our understanding is that the.
On September 15, the board will issue a ruling on the two pads on that day.
Is that correct.
If it is correct will be in a position to announcement with the ruling is on on September 15, So for what you have to wait for some written correspondence.
And then second broadly on the European situation. If you don't successfully get those patents issued the concern that we continue to hear is that bio similars, how should they launch in Europe .
Would not just compresses the price of Soleris, but would have some impact on the utilization and pricing of Alterra some price sensitive countries.
What do you think of that concern is there a chance at deeply discounted soleris biosimilar could impact utilization or pricing of all tumors and European presence of countries. Thanks.
Yeah.
So with respect to the L. hearing.
Correct that September 5th so no new updates there and yes. It is about two patent applications, which is compositional matter and netted of use.
This is a close hearing.
And we think that the written decision would come as soon after that we expect to know the outcome of the completion of the hearing.
The summit at the completion of the hearing so this will be on the same day.
In.
With respect to what this means for the European situation a couple of things first of all as you know we have the formulation patent grants and we have an appeal process ongoing so that means that that patent is going to stick with us.
For the next three to five years, that's number one.
Number two is our strategy is to make ultimately as the standard of care therapy in age and as I said once approved also standard of care for H.U.S.
And with the approval and the launch in Germany.
We have we feel we have the.
Tom enough to to convert a business to second generation, So which is built to mirror.
The timeline so by similar to the best of all knowledge, we think best case scenarios is three years from now.
I think we can do a lot of conversion in upgrade standard of care or redefine standard of care in the next three years.
With respect to interchange ability of build to mirror and Solaire at least two different molecules.
In.
Im not aware of a market analog where biosimilars, it's moving into a branded product. So if you have market analog in Europe .
Please turn them over so that.
I can learn but I'm thinking of older Biosimilar launches in Europe in the market dynamics in each of these countries. These will be.
Two things.
Molecules in two distinct pricing.
Dynamics them looking at Brian here.
Yes, I would just only add that if you stick to that timeframe three years from now and the ambition that we have with Ulta myris facilitated patient conversion it gets harder and harder to imagine that you have patients who have had repeated.
Biden monthly infusions and the experience that comes with that that that we've already seen play out in the us it's hard to imagine that those patients would then or the physicians would be motivated to take a step backwards to go back to biweekly therapy. So the more that we continue to deliver on that facilitated conversion the better off our position is in the less relevant the prospect of a biosimilar becomes I think every quarter. We're in a much better situation not since we have the approval.
We starting with the conversion we have good uptick in us and we hope to do to seeing in the.
In Europe .
Next being eight us there's a lot we can do in three years and I do believe that we have the opportunity to really redefine standard of care for PNM and easy to use and make the IP discussion a moot point.
So let's take next thank you. Our next question comes from Kennen Mackay from RBC. Your line is open.
Hi, Thanks for taking the question, maybe one for John or off I was wondering if you could just help us understand the decision behind starting the trial thrombotic microangiopathy or testing.
Isn't that arty some off label use of some of the reserves.
The decision to run the trial here based on competitive dynamics with other complement inhibitors or just any color there would be appreciated and maybe a follow up for.
Regarding strategy, which was brought up previously.
I was wondering if there was any potential or thinking around issuing perhaps a very small dividends. I know this is going to getting some looks from my biotech peers, who are pretty myopically focused on growth, but that's really it could broaden the shareholder base given some investors might be interested in the story, but there might be precluded from investing your thoughts on how the mandate for cash return.
Thanks, so much.
So I'll start with the first one I think we're looking at this as a significant new opportunity in a severe and devastating diseases that currently doesn't have really any treatment options.
As you May know HSC TTM aim was excluded from our atypical H.U.S. program, even though many of these patients actually have underlying complement dysfunction.
There are approximately 20000.
Patients undergoing such transplants in the us annually.
30% to 40% of those experienced at Tiananmen and about half of those are considered severe related to complement dysregulation and you alluded to celerity, others actually published case series, Joe Dallas, now and others that have shown a benefit of Solaris in this population with that reductions in Tammy and improvement in mortality improvement in survival. In fact in mortality rate is over 80% at one year and an act paper.
They had.
About 60% survival after after year so.
It's not a reason to believe that we understand the mechanism of action and there is an opportunity here to have a real big impact in yet another indication for Ulta mirrors.
Hey, Ken This is Paul I'll grab.
The strategy or capital allocation question.
It is it's our priority is strategic deployment.
So building the pipeline I think we've been we've tried to be very very clear about that that that is our priority at this point in time, we're obviously working on the cash flow generation of the company. So that we could potentially broaden note.
Kind of capital allocation and possibly in a few years returning capital to shareholders I think the way, we think about it particularly with the volatility in the sector is that if we get to that point in time.
Share repurchases would be the preferred avenue for doing that so at this point dividends is not on the horizon.
You still have some work to do on on pipeline. So that that's our main focus at this point.
We'll take the next question.
Our next question comes from Mohit Bansal from Citi. Your line is open.
Saudi Thanks for taking my question.
<unk>, maybe learn quick question on D.N.H. conversion.
Is it possible for you to correct drives the only only a doctor <unk> in that market, what I'm trying to understand is it coming more from the bucket of optimal respondents on one end of the spectrum.
All of these are the the previous blue responders on Saturdays and then going forward.
What challenges do you see from this 40% number to move from move over 40 to 70 or even beyond back. Thank you.
Yeah <unk>.
Try and think selected questions I wouldn't say that from what we've seen so far and the conversions there really isn't any one call it dominant patient phenotype.
For conversion one of the the more prominent early factors seems to be and this is this is often the case in rare disease and launches is the frequency of patient visits. So if a if a patient is seeing the clinician every month or every other month versus once every six months. Obviously there are more opportunities to have a discussion on conversion with their clinician. We also think and this is a very practical point.
That patients who lived some distance away from their infusion center.
Would be not surprisingly more motivated to switch. So overall you know on your question of where do we go from the 40% to get to the 70% it's going to be the same continued journey as education.
Becomes more prominent across a wider part of the patient and clinician community.
Those patient visits will continue we've made really good progress with the commercial payers were now over 75% of that covered lives have a defined policy in place and we don't really hear any resistance on any level from clinicians it's more about moving through those time lines and the progress that we've made so far.
Next question.
Thank you know our next question comes from Stephen Saint House from Raymond James Carolina's out then.
The morning fact, you what is the current U.S. insurance mix for patients on Solaris and ultimate with them can really say is that appreciably different M.G.M.G. versus P.N.H. <unk>.
And if the new Senate Finance Committee drug pricing reform plan were implemented as law is written what do you assess the impact would be too.
Thank you.
Yeah saw with the the ladder and just a couple of things.
No nothing is really <unk>, we so we'll follow what what's going to happen, but overall, we believe all potential exposure is limited and let me go to a couple of.
Topics here.
First of all Medicare is a relatively small part of a business.
Is you know 60% of a global businesses you.
Medicare is about 20% of a U.S. business.
And the same is true for a Medicare point, D. business, which is a very small pause.
Of a total global business.
The the second point on one highlights is that.
Oh price increases price increases above C.P.I. is not really a business model.
We stayed away from that and that's not how we divide.
A business <unk> business is true innovation in an access and and volume.
Then which was effect too.
Pricing strategy.
As you know, we have a global sustainable pricing strategy and Brian already addressed.
The pricing band.
That we're trying to to respect the we have a a narrow crossing bands internationally.
<unk> as well as for <unk>, moving forwards and May maybe the last point I want to make is that.
<unk> is not really a business model. So we have you could call is cool that price transparency.
In a business model, so I hope that that helps you to to frame opposition.
It may maybe I'll just add this is Brian so I I think when we made the points, but it's about 20% Medicare in the U.S. and then the largest portion for us or the commercial payers, there's not really a material difference when you go across indications, but that's why in the case for example of the ultra Myris P.N.H. progress, it's especially important for us that we continue to navigate through the commercial alive.
Policy determinations and each one of those engagements now with multiple launch is underway gives us a chance to give those payers predictability about the outlook ahead. So really commercial is the biggest part of the story.
Okay, we take two more questions.
Thank you know our next question comes from solving rector from Goldman Sachs Carolina's out then.
Thanks for taking my question.
<unk> U.I.P.O. early hearing.
And then I can only when we look at the <unk> I now do you expect this to follow a similar paid for the lawns that we've seen for G.M.G.M.U.M. from Europe , even there I I do you reckon idea from our touch points here.
Yeah with respect to the U., two and Brian will do the second question you know there's not much more I can I can say so.
We believe that we have a a strong case here as I said, we have the formulation patent, but <unk> overall strategy again, it's not about Solaris overall strategy is about <unk>, making that the standard of care that we're moving quarter after quarter moving so we have no the approval.
Germany as launching we have other countries that will join Germany in the launch later this year.
So we believe that when in a pretty good this part here.
Respecting the second question sure and then with respect to N.M.L.S.D.. We are excited about the the launch opportunity. The fact that this is the first F.D.A. approved treatment option for these patients.
Who are really living in a world of fear given the unknowns and the devastating impacts of these attacks.
Is meaningful and it's very motivating for us.
It is an important growth opportunity and just to characterize it in G.M.G.
We often cite the at the.
The high end of the Refractories spectrum, there were about 8000 patients in the U.S. and then aligns with the regained pivotal phase three study criteria.
Dimensionalize at N.M.L.S.D. in the U.S. is about 45000 patients so roughly half of the refractory G.M.G.U.S. population hopefully that helps sort of frame up the opportunity I would say that.
We have gained a lot of neurology experience in the almost two years that we've been commercializing with G.M.G. is we advertise that into N.M.L.S.D. as well.
But there are some different market dynamics with respect to N.M.L.S.D.
One is that physicians have had nothing that is F.D.A. approved to use so that with their use of something for example, like for a toxin. That's created a sense, we believe a false sense of stability from attacks and so we're working through that educational aspect of every attack matters and really.
Stable is a false sense of security and the second one is that we also know that there is potential near term branded competition.
I'll never rising we could not be prouder of the very high bar that we've set with the sillier as per then study.
And none of the cop competitors on the horizon address compliment a core part of the underlying pathophysiology of N.M.L.S.D.
So those are a couple of dynamics, we don't expect a bowl was we we do expect more of a linear uptake as we've seen with a rather neurology launch.
Okay. So we'll take one more question.
<unk> and our final question comes from hard task thing from Oppenheimer airline is open.
Hi, My name is <unk> hard, causing thing kind of question just want to see if you can speak a little to how many of the tunnel patients on Solaris I'll come here in the context of the 5000 patient gone by your.
Yeah. We this is Brian adjust them. So thanks for the question, we haven't broken down those numbers, specifically, but I I think we've given enough that you can walk around the numbers and and get to the right and landing spot. So our ambition is as you noted to to get to 5000 patients or beyond by year end and what's important about that when it getting to reflect back on prior comments. We've made is from the launch of Solaris and P.N.H. back in 2007.
Up until the middle part of 2017.
We had achieved about 2500 patients on therapy, and that's the base indications of P.N.H. any typical H.U.S.
And in the roughly two two and a half years subsequent to that we will have double that number. So that gives you a sense of the velocity of changed in the meaningfulness of neurology in the business.
And then of course inside of that we're actively in the U.S. converting now the P.N.H. patients over to alter Myris. We're thrilled about the early to do for a day that we achieve for atypical H.U.S. or excited to upon approval get going on that journey and then Solaris will continue near term on on the neurology path. So hopefully that gives you enough color to dimensionalize the numbers.
Thanks again everybody's.
As I mentioned I'm really pleased with what we've accomplished so far this year.
And I'm really really proud of the election gene so.
To all of my my colleagues a a big thank you.
And things to everyone for for your time today. Thanks, so much.
Well, ladies and gentlemen, thank you for participating in today's conference. It's just conclude the program email I'll just connect everyone has a wonderful.
Oh.