Q2 2019 Earnings Call

Please standby we're about to begin ladies and gentlemen, welcome to the interest pharma second quarter 2019, operating and financial results Conference call.

Throughout today's recorded presentation, all participants will be in a listen only mode. After the presentation. There will be an opportunity to ask questions at that time. Please press star one on your telephone keypad.

If you are using a speaker phone. Please make sure. Your mute function is turned off to allow your signal to reach our equipment.

I will now hand, the conference call over to Dr., <unk>, <unk> and <unk> Vice President of Corporate Affairs. Please go ahead Sir.

Thank you Amy and good morning, everyone.

Earlier today, we announced our second quarter 2019 financial results and operating a cheap.

A copy of the press release can be found on the Antares website at www dot and terrorists form a dotcom under the for investors section.

This mornings teleconference. Also contains an interactive slide presentation.

So if you have dialed into the audio only teleconference. You can follow along with the slides, which can also be found on our website under the investor information section.

The conference call and slide presentation will be simultaneously webcast on the for investors section of the Antares website under Webcasts and presentations tab.

If you are currently unable to access our website the slide presentation will be archived under the webcast and presentations tab at the conclusion of todays call.

Before we begin I'd like to remind you that some of our statements made during this conference call will contain forward looking statements within the meaning of the safe Harbor provisions.

U.S. Private Securities Litigation Reform Act of 1990 fives.

These statements are subject to certain risks and uncertainties and actual results could differ materially from those projected in any forward looking statements.

Forward looking statements provide antares current expectation or forecast of future events factors that could cause actual results to differ include but are not limited to.

Market acceptance adequate reimbursement successful launch in future revenue from Zions stood and Tevas generic at B. Penn.

Market acceptance and future revenue from Mckenna Sumatriptan and Otrexup.

The timing results are proprietary and partnered research development and clinical trials, including 80 or a 17 a one.

Lets attracts a different topic pregnancy and development projects with Kevin Pfizer.

Statements about new product approvals and that's the action.

And the company's financial performance, including achievement of the updated 2019 revenue guidance and other factors, which are also identified in todays presentation and from time to time in the Companys filings with the FCC on Form 10-K , and as updated in the Antares recent periodic filings on Form 10-Q , and 8-K and other filings made with the Securities and Exchange Commission.

Links to these documents are available on the Investor information section of our website and we encourage you to review these materials.

Antares is providing this information as of the date of todays conference call and does not undertake any obligation to update any forward looking statements contained in this conference call as a result of new information future events or circumstances. After the date hereof, except as required by law or otherwise.

The company cautions investors not to place undue reliance on these forward looking statements.

Joining me on the call today are Bob Apple, President and Chief Executive Officer, and Fred Powell Executive Vice President and Chief Financial Officer.

Let's review the agenda for todays call on slide number three.

Bob will begin with a high level review of our outstanding second quarter results. Fred will go through the detailed financials and Bob will give you as I said launch update and review pipeline and future catalyst after our presentation well open the lines up for your questions.

I'll now turn the call over to our CEO , Bob Apple Bob.

Thanks, Jack and good morning, everyone on today's conference call and webcast, it's great to talk to everyone today.

Jack noted a few minutes ago that we announced our second quarter earnings. This morning, but what he didn't mention is that we reported very impressive quarterly and six month revenue growth. We took another big step for into ours.

Laying the foundation for what we believe what we believe will be transformational period for our company.

Our strategy drives us to focus on the development of a diversified commercial business consisting of both proprietary and partnered products.

We have long believed that our success as an organization is rudy into simple core values.

Developing commercialized proprietary products utilizing our device technologies that make a meaningful difference in the lives of our patients and second helping our industry partners accomplish the same.

We believe our quarterly results validate those two core values and allow us to continue to focus on a revenue targets for the year.

We have already made so much progress in fact.

Study to announce this morning that we are raising our full year topline revenue guidance to a range of 100 to 110 million for 2019.

So let's talk about some of the highlights from the quarter in how our achievements over the past six months help pave the way for why we believe 2019 will be a record year.

Please turn to slide number four.

Today, we reported approximately $28.4 million in total revenue.

Double the 14.2 million, we reported in the second quarter of last year.

This is the sixth consecutive quarter of total revenue growth.

We believe this is a direct result of the successful execution of our corporate strategy I just mentioned.

Product revenue grew 86% versus the same period last year, and importantly represents the ninth consecutive quarter of growth.

I mentioned in previous earning calls.

Shifting development Radney to product revenue was an important goal for the company and clearly we have achieved that.

Impressive product revenue growth was driven by all of our key proprietary and partner products such as I've said.

Generic at be pain, and the Makena sub Q auto injector.

As a result of our product revenue growth our royalty revenue from our partnerships grew 335% to $5.6 million.

I would like to briefly touch on these key products before turning the call over to Fred.

We want to assassinate with a full sales team essentially in January and we continue to see increased physician and patient interest in size debt.

In fact as I said is currently the fastest growing brand new product and the testosterone replacement market.

With regard to our key partner products.

Kevin launched late last year in limited commercial quantities.

But the second quarter of this year saw a dramatic rise in shipments to trade and increased market share of Tevas generic MBS.

Kevin has informed us that the pain for adults.

In full launch mode, and they had entered into contracts with all of the major gpos by the end of the second quarter.

Kevin still anticipate launching the pen junior in time for the back to school market.

The Mckean auto injector continues to be a meaningful driver of growth for us as well.

Physicians and patients continue to prefer the auto injector over the high end product rezoning and Mccain is highest market share in the hydroxyprogesterone market to date according to that.

So how do we keep this momentum going we had after all set some ambitious goals for the year and for the long term.

We believe it will continue to exceed by staying true to our strategy that emphasizes proprietary and partner success.

To that end last month, we made a commitment to both our proprietary and partner businesses by expanding our future laboratory manufacturing office in warehousing space in Minnesota.

We believe this new facility will support our anticipated growth and significantly expand our capabilities as a developer of pharmaceutical products and as a partner to many companies lean we are when we work.

We will gradually transition to the new facility as we update the site, it's likely we'll complete the process as a lease on our turns site expires.

This is truly been a breakthrough quarter for cars, we saw substantial increases in topline growth and reductions in operating losses, but most importantly, we believe we have set a course for additional growth in future quarters.

I'm now going to turn the call over to Fred for details on our outstanding second quarter and first half financial results Fred.

Thanks, Bob Please turn to slide number five.

As Bob said this was another tremendous quarter for Antares with significant sequential revenue growth and another reduction in quarterly net loss.

Picking up on that theme, Bob introduced you'll recall that over the past 18 months, we've had several substantial revenue and operating expense changes due to the approval of two partnered products and one proprietary product.

With regards to the meaningful changes in revenue mix Amex Makena auto injector and so I was happy that we're both approved in 2018 with the full launch of Makena Subcu in the second quarter last year and limited commercial launch of generic yeah. We've been late last year.

We are now recording device and royalty income for both of these products.

On the all important proprietary product side of our commercial business Zoster launch continues to go according to plan and Otrexup has seen nice growth with the Salesforce detailing new physicians in the expanded territories. So let me start my financial overview by providing a detailed breakdown of our revenues and operating expenses for the second quarter 2019.

Total revenue was $28.4 million for the three months ended June Thirtyth 2019, compared to $14.2 million in 2018.

101% increase for the six months ended June Thirtyth 2019, total revenue was $51.7 million compared to $26.9 million reported last year, a 93% increase.

Product sales were $20.6 million for three months ended June Thirtyth 2019, compared to $11.1 million in 2018, and 86% increase and for the first six months of 2019.

Were $38.9 million as compared to $22 million reported during the comparable period last year, a 77% increase.

Sales of our proprietary commercial products is ousted and otrexup totaled $9 million for three months ended June thirtyth 2019, compared to $3.8 million in 2018.

And were $13.8 million for the first six months of 2019 as compared to $7.7 million reported during the same period last year.

Partnered product sales totaled $11.6 million.

Three months ended June Thirtyth 2019, as compared to $7.3 million in 2018 and consists of revenue from generic FBR.

Devices, Makena, Teriparatide, sumatriptan and needle free devices.

The first half of 2019 partner product sales totaled $25.2 million versus $14.3 million report in 2018, the three and six month increases in product revenue were primarily driven by sales as as that NFC devices.

Licensing and development revenue was $2.2 million and $3.2 million for the three and six month periods ended June 32019, respectively, compared to $1.8 million and $3.1 million in 2018.

Licensing and development revenue includes license fees received from partners for the right to use our intellectual property and amounts earned in joint development arrangement with partners under which we perform development activities or develop new products on their behalf.

Our licensing and development revenue for the three and six month periods ended June 32019 was primarily from the cemetery Terror, Teriparatide and Pfizer rescue pen development programs.

Royalty revenue was $5.6 million for three months ended June 32019, compared to $1.3 million for the same period in 2018, 335% increase for the six month period ended June 32019 royalty revenue was $9.7 million compared to $1.8 million in 2018, a 451% increase.

Royalties are recognized based on end market sales of products sold by our partners. The significant increase in royalties for the three and six month periods of 2019 was primarily attributable to increased royalties from amax Makena auto injector product from Teva on their net sales of the generic product, which was launched in limited quantities late last year.

Operating expenses were $17.6 million for the second quarter 2019, compared to $11.1 million in 2018 operating expenses for the six months ended June 32019 were $34.9 million as compared to $22.2 million in 2018.

The increase in operating expenses for the three and six month periods of 2019 was primarily attributable to additional sales and marketing expenses associated with the launch of South said.

Net loss was $2.2 million for the second quarter of 2019 compared to $4.5 billion in 2018.

And $7.8 million for the six months ended June 32019, compared to $10.7 million in 2018.

A reduction of 28%.

Net loss per share was one cents and five cents for the three and six month periods ended June 32019, respectively, and three and seven cents in 2018.

At June 32019, cash and cash equivalents were $40.2 million compared to $27.9 million at December 31st 2018, and $23.2 million at the end of the first quarter.

During the second quarter 2019, the company amended the existing loan and security agreement with Hercules capital at a new $15 million loan was funded upon the execution of this agreement for a total of $40 million.

You'll recall that the first project $25 million was funded to us upon execution of the original loan agreement in June of 2017 at the same time, we also announced the termination of the aftermarket or ATM equity offering facility, which we did not utilize during the second quarter 2019.

Also in the second quarter, we received $2.5 million or half the remaining balance in connection with the previously announced sale does on the jet needle free delivery system, we anticipate the transaction closing in the second half of this year and receiving the final installment of $2.5 million at that time.

You will recall that we record the gain on the sale of the needle free product line in the fourth quarter 2018 for the first six months of 2019, we sold bearing $4.2 million worth of devices, we will stop supplying needle free devices. After the completion.

During transaction.

That concludes my prepared remarks, I'll now turn the call back to Bob Bob.

Thanks, Fred Please turn to slide six for an update on design and launch.

Launches eyes that is without a doubt an important part of our commercial strategy and I'm happy to report that it's going well.

Managed care access, which is critical to the success of any product launch has continued to increase each month as we move towards our goal of two thirds of all commercial lives covered by year end.

Through June .

And 15000 prescriptions haddonfield. According to data from Sun Symphony Health solutions and that number does not account for direct sales of the product or all the multiple month refills.

It is important to note that sales as I said to the wholesale distributors are higher than the number of prescriptions as reported by Q yet.

Anthony.

You are seeing the prescriber base across all of the medical specialties specialties weve targeted.

Urologist and endocrinologists are running approximately half of all prescriptions, while general practitioners nurse practitioners physicians' assistants, and all others are writing the balance.

It's a good diverse blend of prescribers and we believe it forms a solid foundation on which to expand.

The most recent data shows that our prescriptions are being written for a variety of patients.

Who are either new testosterone replacement or patients who are switching from a gel or generic injectable.

It's still early in the launch, but we feel the trends were seeing in both the number of prescribers and the kind of patients using the product means that product is building momentum.

Therefore, we believe we've now reached sufficient number of physicians and patients and create enough brand awareness to accelerate our social media presence, we launched a new campaign designed to educate patients and the Caribbean to ask their doctors in size that is right for them.

And while social media campaign is ramping up we want to make sure we stay in touch with the physicians who right. So we have a number of second half marketing initiatives plan and a full slate of clinical congresses to attend.

Turning now to slide seven.

You can see the monthly prescription trends for Zioptan continue to grow and are trending in a positive direction.

More importantly, new prescriptions are increasing and refills of growing a strong sign of patient persistence.

Since launch Zeiss stand has recorded double digit month over month sequential percentage growth in both new and total prescriptions.

In summary over the first six months since I said launched we remain very pleased with the progress we've made thus far.

Moving now to slide eight.

An update on our pipeline.

Focusing first on our partnership pipeline.

The tenant progress for Tayo, where teriparatide for osteoporosis and by adding organic tied for type two diabetes, alright, the FDA filing in the pathway.

To date Teva has received regulatory approval for marketing a generic forteo in 18 countries outside the us including Canada.

We look forward to the potential FDA approval of these products and in the interim.

We have continued to ship prelaunch quantities of generic for Titan devices to Teva in anticipation of a commercial launch in 2019.

We entered into an important collaboration with Pfizer last year.

We continued development work on modifying our quickshot device for use in Pfizer's rescue pad.

Pfizer has initiated development program on their end and our respective teams meet regularly.

And although the drug is undisclosed we are very excited about the potential for this combination product.

We are continuing development work on our next potential proprietary product 18, 17 or one.

Combination drug device product and then neurology space.

We continue to make progress on this new device and we selected a CMO to work on the formulation.

Early development is also progressing on another potential proprietary product focusing on an unmet need in urology space. We believe this product is a great strategic fit in our pipeline.

And finally.

Last quarter, we disclosed another pipeline program for product with orphan designation.

An auto injector of methotrexate to treat ectopic pregnancy.

We have initiated clinical planning and look to meet with the FDA to discuss development pathway.

With another impressive quarter in the books, we believe in target is building excellent momentum for the balance of 2019 slide nine lays out our potential catalyst.

Based on positive physician and patient feedback we believe it continues to be a significant opportunity for antares. Our number one priority is the successful launch in the us market, which could become the main driver of topline growth for the company.

The launch by Teva other generic equivalent to the pen is gaining excellent momentum.

Kevin has seen an increase in the weekly scripts in the generic at B. Penn and a strong market share of approximately 29% of the pain market at the end of the second quarter. According to Symphony Health solutions.

Going forward, we expect to receive larger royalty payments on Teva sales as a generic Debbie.

As well as continued significant auto injector product revenue as Kevin moves toward our stated goal of 50% market share.

Amen, Kenya continues to be solid contributor to our revenue growth.

AMAG is continuing to work hard to increase our share of the market and defend the makena franchise by promoting the benefits of an auto injector.

In May he may reported the auto injector.

Captured 54% Hydroxyprogesterone market in the first quarter of this year.

A 7% sequential increase from the fourth quarter of last year.

Based on the royalty report for the second quarter. We believe he may continue their market share growth of the auto injector the demand for the Makena auto injector appears to remain strong and we are looking forward to more details on the progress with aiming reports our second quarter results Tomorrow.

And of course, another catalyst for 2019 is the potential approval of Tevas Anda for a therapeutically equivalent generic to forteo.

We believe this is a potentially big opportunity for both companies and look forward to further guidance from Teva on their launch plans.

In closing.

This is an exciting time for antares and for our shareholders. We believe that our second quarter and year to date results continue to show the progress we've made and focusing our future growth on increasing the commercial mix of our total revenue.

The balanced revenue growth from both proprietary and partner products helped drive record sales.

We believe our strategy for growth is sound, we believe our strategy is working.

And we believe what we share with you today firmly places us on a clear path forward towards an extraordinary period of continued growth for the company.

Operator could you. Please open the lines for the question and answer session.

Thank you Sir.

Reminder, if you would like to ask a question. Please signal by pressing star one on your telephone keypad. If you are using a speaker phone. Please make sure. Your mute function is turned off to allow your signal to reach our equipment.

Again press Star one to ask a question well pause for just a moment to allow everyone an opportunity to signal for questions.

Well take our first question from its disagree with Cowen and company.

Good morning, congratulations on a very exciting quarter on either.

I have a few questions first on the asset growth can you update us on the refill rates, how might we benchmark that against compliance with a intramuscular testosterone replacement therapy.

Second would you be able to provide any updates on for tayo from what I understand Teva may have a potential advantage over other competitors.

How might this play out for you in terms of production standpoint.

And then I have one more.

Sure. So thanks for the questions on the as I said.

Launch obviously, it's still early in the launch, but so far the the reasonable rates at around 75% of all prescriptions be ready region, which is actually.

Very favorable compared to any other testosterone product on the market typically the Jos you see a very quick rotation out in a very short period of time on average only two to three refills and similar on the high Im injections, a little bit longer, but still very quick turnaround.

Short period of time that they're on the product so.

So far the persistence has been pretty strong with Zions said clearly we think its.

The way that the device.

Operates and how easy to use to use.

And how painless it is I think it.

Hopefully at this point it seems to be translating into very good compliance for patients.

The growth.

Continued well into July .

We don't have the final numbers from a Q, yet, but we know that the prescription trends continue to grow and we clearly saw growth over June .

Into July so things are continuing to go well for sized it.

On your question about for Tayo.

The only thing I can say is that.

Taboos and it is a true and nowhere is intended to be fully so suitable at the pharmacy I think that when you look at the competitive landscape of other products that are trying to compete against for Tayo.

They are not.

Fully substituting generics they are.

[noise] products that are five of IB twos, and so clearly there is a huge advantage for teva for that product to be switched at the pharmacy.

When someone write a prescription for forteo.

We continue to ship devices in Q2, two tablet in anticipation of their launch and.

Again, we look really we look forward to getting the approval in the U.S.

Soon.

No and hopefully be launching that product in 2019.

Like I mentioned earlier it has been approved in 18 countries outside the U.S. and Teva is gearing up for those launch for that launch.

In 2019.

That's really helpful and if I could slip in one more.

Finally on at B. Penn Teva has provided commentary that they believe they could be approaching 50% share exiting 2019.

Could you give any insight into the dynamics behind the potential for man in Q3 and supply for that back to school season.

Yes so.

Like I mentioned earlier.

The demand has been very strong and Teva really just started to.

Engage in full contracting at the very end of the second quarter and so we saw a pretty tremendous growth growth even without contracting. So obviously now that we believe all the contracts or most of the contracts are in place. We expect to see an acceleration of that growth there continues to be supply disruptions for our competitors.

Both Mylan and.

Impacts were and Neil has had issues with the auto injector, we do not and no new orders Teva Teva has.

Sufficient supply from the market and so we feel that they will continue to potentially take.

Market share as we go forward their expectation is to have the F.B. Penn Junior available for the school launch or Im sorry.

The start of the school year.

And.

If thats the case that that that will help them bring in more markets here potentially because.

Clearly, it's not a large percentage of the market, but I think as an important percentage of the market.

For.

For the pharmacies to have both products on their shelves.

Congratulations again, thank you.

Thank you.

If you find that your question has been answered you may remove yourself from the queue by pressing the star key followed by the digit too.

Well next year from or unload that with.

C Wainwright and company.

Hi, guys.

My congratulations as well on a pretty big quarter.

Couple of questions on Xyo stead.

Obviously reported sales were higher than I think most of us were expecting from third quarter <unk> third party prescription data I think it implies at least an I.Q. via numbers about a 460 dollar value per access can you just confirm to US a couple of things whether there is any impact from channel fill your inventory impact positively in this quarter.

Also maybe just talk to us about the upside you highlighted.

In real life versus what we're seeing at the data is that just a sampling issue in your mind or is that actually just.

You know the retail guys pulling in more stock than in anticipation of refilled than they are seeing actual scripts. So far and just lastly can you comment just knowing where you are in contracting what sort of current and or steady state gross to net number we should use against whack going forward and if I may just on the EPA pen can you just remind us is there a lag on royalties from Teva like a quarter lag still or is that changed such that the big.

Back to school boom in Threeq should we expect to see that hit next quarter for you or is that going to be a four fourth quarter royalty a bump. Thanks.

So our thanks for your questions I will answer the question first I hand over there as I said a question to Fred on the Abbey, We currently book.

Royalties on the quarter. So we book Q2 royalties based on the Q2 revenues.

The so for Q3, if there is an increase in sales related to the back to school timeframe. We will see that in Q3. So there is no lag anymore, we get a report from the from Teva as to how much they shipped we estimate the royalty and then.

We get that royalty some time and so this 45 days after the quarter is over.

As far as the multiple questions on Zonda said I'll, let Fred try to answer that [laughter]. Thanks.

With that I'll start with the channel fill question you had we're able to see how much inventory all the big three distributors have at the beginning of the quarter as well as the end of the quarter and we actually saw a tightening of the inventory that they had on hand, meaning they had more days on hand at the beginning of the second quarter as opposed to the end of the second quarter. So we don't believe its not a channel fill issue that we saw with the.

Revenue numbers taking place.

With regards to the Q via the Symphony data versus what we're actually reporting well, we actually reported as you know the shipments we actually make from our Threepl to the distributors. We then are tracking the information from Symphony internally its I.Q. via and we are seeing where it does it match up very well and they're probably several reasons why that could be sampling is obviously one that could be some of those that we sell direct to is another one plus patients often we'll get multiple months on their refills. So the prescription may actually come back is one rebuilt when it back to could be three or six months worth of rebuilds that are taking place, but there is truly a disconnect between what's actually being reported by symphony as well as what we actually see going into the trade since the trade is not increasing the amount that they have in terms of days on hand for their sales.

Yes, the only thing else I would add on is that in product launches. This is not atypical.

For products that where there is not a lot of volume, it's very hard for them to estimate.

Through their geo spatial kind of.

Analysis as to where the scripts are coming from and what the volume is because they obviously don't do 100% sampling.

So we have that element and I think what what Fred mentioned as well what we're seeing is for the patients that are already on testosterone. The doctor knows they're going to continue to stay on it so they're just being switched to our product. If they are on an injectable I am and there's been switched as I've said, so I think the doctors are much more comfortable giving multiple prescriptions in one or multiple refills and one prescription as opposed to if it was a totally new drug and they've never been on it they may be a bit more cautious as to how they do that so we think is really combination of those elements, where we're seeing this.

Larger amount of shipments being made what we do know is that the retailers are not stocking our product. That's a it's a high priced product from a whack standpoint, there is no need to stock up product and when you can get the product within a day from your distributors and so.

We like Fred mentioned, we do really good job of monitoring our inventory levels at the distributors and there's clearly has not been any kind of channel build or anything like that and what I think you had one other question, though is the gross in that piece and.

As we take a look at where our our gross number is for the whack price for 99.

We're seeing less than a 50% gross to net deductions. So as as you look at your model going forward you know.

Assume that it's going to be less at this time again as we continue to add additional plans, we see rebates that could impact the gross to net and also with the first bill free programs that we have that could also impacted as well, but as of right now, it's it's a little bit below the 50%.

Gross to net deduction.

How does that look that that includes free drug not just discounts and rebates.

Correct, that's right right right. So as we move forward to gross to net will get better as we gave last free product out and as a.

Sampling and all those things kind of start to wind down.

Hi, Thanks, so much.

Our next comment question comes from <unk> with Piper Jaffrey, David Amsellem.

Hi, Good morning. This is Mickey Ingerman on for David Thanks for taking the questions first onsite instead can you provide any metrics around the number of unique prescribers.

In Twoq and how that compares with one Q1 9.

And then if you guys could comment on the nature of the step there is as I said, our most patients having to have prior been on a prior topical.

Treatment before getting access to as I said.

So on the number of prescribers I don't know the number off the top of my head is we're trying to look them up but clearly we've had an increase in prescribers on actually on a weekly basis. We continue to see new prescribers writings is dead and what we're doing what we're trying to do is get those prescribers to write multiple.

First prescriptions as oppose the ones and twos east when they're trying to as or try and size that.

Up to this point there is around 2400 prescribers, who have written for Zions dead.

And clearly it's the same dynamics that you see with with any launch product.

There are some large writers of make.

The take up a large percentage of in total number of prescriptions that are being written but we are seeing not only a large number of writers, but also across all the spectrums that were that were who were calling overseen like I said earlier about 50% of our scripts from endocrinologists in urologist.

Which is unusual because typically you see a lot more from the primary care docs and I think thats because they really believe in the data that are seen as far as the levels and the.

Testosterone in a steady state and so forth the primary care physician to take a little bit longer to adopt just because typically they are waiting to see what the kao elder doing but still were seeing 50% of our scripts coming from the primary care physicians or sexual medicine docs. So I think the mix is really good and we continue to see more and more docs.

Writing Xyo stead.

And I'm, sorry, I don't remember your second question.

Just the nature of steps there is and whether a patient have to have been on prior topical treatment before.

Yes, so it really depends on the if the plan has a contract with us.

Typically there.

If there is any step through its drew a generic which is very normal for a tier three coverage.

And then we obviously have plans where there is no no step through.

The most egregious plans as far as the high cost ones I try to keep those costs as low as possible from their pharmacy may do a double step, but thats very few of those so I think in general for tier three we have the traditional.

Step through a generic and then you get to use zeiss that the good news is that.

Where 50% of our patients are already on a testosterone product there already done this that because the market is all generics except for his eyes that for the most part and so.

It's been a relatively.

Simple step through for most physicians and patients.

But again, we use.

Managed my meds or.

Cover my Meds already covered by managed to help with the adjudication process for those patients that are new to therapy and not have to go through maybe potentially a step.

Got it that's helpful and if I may sneak in one more when is the earliest that we could see.

HRS 17, or one or the product for the euro logic indication move into the clinic.

Yes so.

We continue to do work on that.

You know.

Our expectations is you know I think that we will see potentially that in the clinics.

Next year.

You know, we we had to do some re formulation work that's going on going we think we're going to get there on that.

And then clearly when I mentioned earlier it is a new Penn and we've done a lot of development work that's on track to be ready and so I think things are moving along there and we expect to move that into clinics next year.

Great. Thank you so much.

Well next year from Anthony Petrone with Jefferies.

Hi, Thanks, and congratulations on the good quarter here.

Coupon Xyo stead, and maybe just some questions on partnerships.

The first on on Zioptan would just be you know can you give us an update on the payer landscape. It sounds like you are ahead of schedule last quarter. How many covered lives are actually under contract at the moment.

What benefit do you think that had on on the print. This quarter 9 million was well ahead of what we were expecting.

And how many more contracts could you expect before the end of the year and then I'll have a follow up on partnerships. Thanks.

Yeah. So for as I said coverage, we were probably around 60% of all lives covered a show like I mentioned earlier, we did sign when a larger pvms late last quarter and they are going through their review process. They put different tiers of plans on cover over time and so obviously the the more generous plans that are first ones that.

We'll cover as I've said and as they look at Dover deal through their formulary review they start to drop and the other one so we're at 60, roughly 60% and that represents over 100 million lives covered for his eyes dead or more I don't know the exact number but I think it's it's really trending quite well.

For us towards our target of.

Basically 75% of all lives covered by the end of the year.

So that you know as we get more and more coverage obviously it's.

Making it easier for doctors and patients to get size that.

An important.

Key thing for us.

The.

What do we got a second yeah that helpful. Yeah on partnerships, maybe just a quick update on on Pfizer the rescue pen.

Where that sits in this.

I guess really in the wake of the changes that are going on in that business in of itself. So we are seeing some.

Strategic business units sort of pair up there and his separation I'm certain businesses. So just any update on on Pfizer and what the changes of Pfizer mean for that development program. Thanks.

Sure as far as our Pfizer relationship the recent transaction today announced.

With Mylan does not appear to have any effect on our transaction our relationship was directly with Pfizer and not with up John which is the division that they're spending off and so there's actually been no.

Impact whatsoever to that program so.

You know.

Whether or not they spin meridian off.

In that transaction first of all as unknown, if they're going to do that or if it's even going to be approved and secondly, it likely won't impact us in a negative way and in fact, I think it could be viewed as a positive for us as they look to do more potential combination products I think that.

Our relation says that quite strong with Pfizer in a it could lead to more opportunities, but I can't speculate on that transaction, it's going to take over six months for that to completely figure kind of land, where we're close and so for us. It's a it's business as usual for Pfizer and.

We don't see that having any negative impact on our business with them.

Thanks.

Okay.

And we'll next hear from Elliot Wilbur with Raymond James.

Thanks, Good morning, just real quickly following up on your earlier comments around the gross to net realization and leased or expectations for.

Sort of longer term.

I use around that metric, obviously, we expect it to improve but I guess as we think about.

Modeling out your numbers is you know using a number around 60% does that sound something like something that would be sort of reasonably close to kind of steady state.

Well, we're a Elliot this is Fred ER.

As I said were slightly below the 50% in the the gross to net I, we can't predict right now how much it'll improve I don't expect it will deteriorate much it could improve somewhat.

Uh huh.

It could get as high as 60%, but we're not there right now and I can only comment on as to what were now.

Yeah, I think it really it right now it's a you know we still have we still anticipate on enter into other contracts with payers and really depending on where that rebate is going to determine ultimately where we land you know long term potentially alan's Ais data. So what I can say is I think that the gross to nets are exactly what we expected in the launch year and we expect them. They can continue to improve.

And you know for a for a branded product I think we're going to be rate, where most branded products are from a gross and net.

Okay. Good thanks, and you know with respect to the change in the full year revenue outlook.

I want to.

Don't want to sort of over analyze the incremental change, but any comment you can make with respect to sort of where.

The you saw the sort of the key areas of over performance relative to prior expectations and you know what was sort of the key driver behind the.

The bump up in your full year outlook.

Sure that's not a problem as we took a look at some of the orders that we were receiving in for more partners as well as potential royalties. We saw the EFI being very strong in the back half of the year. In fact, if you know what surprised us how strong it was in the second quarter and we continue to see that demand going through the end of this year and even into the beginning of next year and so that was probably the one area that we felt most comfortable about as we were looking at our guidance going from the 95 to 105, taking it to the 100 to 110, so product as well as royalties or a surrounding it.

Good day, Thanks, Fred and a follow up financial question for you as well could you just provide some color around operating cash flow metrics in the quarter and.

What your expectations would be for.

Operating cash flow over the balance of the year.

Sure No I in the second quarter. It was a bit unusual right because we received in the 2.5 million from faring a back half of the year, we expect to receive in another $2.5 million in from bearing as well in the first quarter based on timing of revenues our inventories that built up in a later on when you get a chance to analyze the balance sheet you will see that the inventories actually came down even though we increased our revenue significantly quarter over quarter. So both of those items a allowed us to actually.

Will be cash flow positive. If you will once you pull out the the $15 million that we increase with the Hercules going forward as we continue to see our revenue growth, we will need to continue to monitor our inventory as well as our receivables to make sure. They do not get out of balance and causing US actually you know use more cash as we grow the business, but I would not expect to see significant cash usage in the quarters going forward.

Okay. Thanks, and one final question for Bob going switching gears and turning to methotrexate and.

The potential like topic, praising the indication I guess, given the body of literature Thats out there with respect to this active in that indication because my assumption had been that there is there is a reasonable likelihood that this could be a paper in D.A.. Obviously, you won't know that until they actually sit down with the agency, but do you think at this point that that is a is a realistic expectation.

No I think that.

I think that did the body in the body of medical data out there supports obviously, what we're doing.

But because it's an auto injector because it really has never been an approval for methotrexate for ethnic ectopic partner, so they're going to want to see some.

Data relative to.

To you know to methotrexate.

The auto injector for ectopic pregnancy.

So likely clinical studies will be required.

And so.

How large of a clinical program that will be is really what the point of the meeting with the FDA will be we don't anticipate it to be.

So.

A very large program, but at the end of day, we still have to dose patients I try to get the right dosing parameter for for the majority of patients because it is based on a way.

Basis to some degree and so.

Is there any parameters and we'll be working out with the FDA, but clearly we do think we will be putting methotrexate in people.

Women that are trying that are preventing an ectopic pregnancy.

Great. Thank you.

[noise] from Ladenburg Thalmann, we'll hear from Matt Kaplan.

Hi, Good morning, guys congrats on the quarter.

Wanted to just dig into as I have said for for a minute it seems to me that.

The <unk> so to speak low hanging fruit for zions Ted would be.

Taking patients off of other injectables and converting them to as I have said I guess, where are you seeing the patients come from in terms of that background meds.

Background prior to your T. therapy is it from Injectables or is it from Topicals and where are these patients coming from are there or are they didn't know if a patient.

Right so.

50% of our patients are de Novos annuity testosterone treatment, which I think is a great sign or a great signal that the Doctor view this product as a first line therapy.

Obviously with or if it's the if there are de Novo you tend to spend a little bit more time trying to get to coverage for it because they've got to go through the steps you know if there is a step through generic or if there's prior authorizations they have to work their way through but we've been.

Relatively successful in doing that on the balance of the patients clearly the you know what their own Karen therapy. The majority of those patients are intramuscular injection.

Where.

It's a pretty simple switch in the physician's mine and it also into patients mind, where basically we believe giving them a better injection a better injection process steady state as opposed to some of the variability that they see with the I'm injections and then we are still are starting to see some gel conversions.

Yes, they are typically the more difficult ones to convert because they're they're obviously on a gel because are you potentially afraid of needles or are they.

They are new to therapy and that was the easiest thing in their mind to use and then they realize it's not so easy to apply gel every day.

And so we're seeing patients converted from that but that's taking a little bit more time than a de novo and I am injections, but overall were really happy that all of those patients are becoming potential patients for as I said.

Very good I guess given given your.

You know initial success, you've had so far and the launch.

Our huge are you planning any changes in your sales organization, increasing in size or what are your thoughts there.

I mean, a right now you know obviously, we always look at the number of territories, we have and how they're doing and.

So whether there needs to be expansion or some of them actually or viable or not right. Now we don't intend to change the number of reps I think that we currently have 83 territories that is working well.

That will be an analysis, it's done in the in the third quarter of this year, just so that we're ready for Q1, if we decide to change anything but honestly I think that.

It'll be tweaks here and there and I'm not expecting any type of a need to increase the number of reps dramatically at all and so we feel really confident that we launched with the right number and that right now we seem to be mean, maintaining that number as our go forward thinking but again the analysis has to be done you know towards the end of the year and we'll we'll update you if theres any kind of change.

Sounds good and then then you know given freds prior comments in terms of cash usage.

Any oh, he's a dirty word profitability what do you what are your thoughts on achieving profitability in the coming quarters.

Yeah, So I think that you know.

Frank can answer this probably better than I can but I think it's <unk> I'll take a shot at it you know we ate it really is a function of the mix of business that we get.

Obviously, if if our.

Royalties continue to go up that's a very profitable piece of our business. So that would that would have an impact on that what we're striving for is.

Clearly be cash flow.

Breakeven to positive and just so that we can continue to grow the business and we're we're heavily investing in size said right now and we had you know I think pretty terrific results from a cash burn standpoint from a you know a very small loss relative to putting such tremendous amount of resources on a new launch.

And so it really depends a lot on how fast.

As I said picks up.

And these are big wildcard for US you know Teva hits, there, 50% bogey of market share that could dramatically impact our profitability.

Depending on the net selling price it they ultimately wind up with Thats. Another key factor for us what do they sell the ATB spend for as they get more and more market share and so our focus is really on cash flow as opposed to profitability, but I think that you know, we're putting things in place where clearly you can see us moving towards that we just don't want to give a particular quarter or.

Guidance as to when that profitability comes because it.

That half our businesses outside of our control with our partners, we obviously shift and devices, we control that element and so far we've been for.

In performing really well in that area.

But at the end of the day.

How mccain it does how abbvie does and how other products like Sumatriptan do really impact that profitability.

Question.

But all I can say is that we're executing and we're going to continue to execute and try to grow our business that we control and as I said is a clear is off to a really good start in that area as well as otrexup.

Great. Thanks, a lot.

Hmm.

And as a reminder, if you would like to ask a question. Please press star one from your phone.

It appears there are no further questions at this time.

Sure what I'd like to turn the conference back to you for any additional or closing remarks.

Thanks, Jamie and thanks again for joining us on todays conference call. If you have any follow up questions. You can reach me at six or 935, 930, onesix that completes today's call.

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