Aerie Pharmaceuticals, Inc.

activities was relatively low, $22.4 million, and we had $218.4 million in cash, cash equivalents, and investments as of September 30, 2020. The net cash used in operating activities of $22.4 million was better than the second quarter equivalent of $22.9 million, reflecting continued progress in containing operating expenses. Let me emphasize an important point. We used about $22 million of cash in the third quarter, and we ended the quarter with $218 million of cash. The additional $15 million from the Santan licensing agreement obviously further bolsters our cash position. Consider also that the burden of funding the Phase III trials in Japan for OPRESA and ROCLATAN is materially reduced, and prospects for future collaborations are on the rise. With that, and ongoing revenue growth, we have a substantial cash runway. And I'm going to say this slowly. There is no current need, nor desire, nor plan to raise equity capital. Finally, shares outstanding at quarter end total 46.8 million. For additional information regarding our third quarter results and prior period comparisons, please refer to today's earnings release in our form 10Q which we expect to file tomorrow. Now, I would like to turn the call over to Jerome for questions. Jerome?

Thank you. At this time, I would like to remind everyone, in order to ask a question, please press star 1 on your telephone keypad. Your first question comes from the line of Ken Kashuturi from Cohen & Company. Your line is now open.

Thanks so much, Rich. I think you said it even slow enough for someone not as smart as me to understand, so thanks for clarifying that. On ROCLA-10, just wondering, guys, if you can talk about further work on managed care for Part D. I know we have pretty good coverage. Just wondering if we can expand it, and when do you think we will be able to? And then a second question is around what you hear from the clinicians in terms of hyperemia. From time to time on clinician checks, it comes up. Wondering if you could put this into some perspective, in terms of what type of retention rates, which I think would be the best way to monitor this, what type of retention rates do you see in Prostaglandins, other Prostaglandins, and can you compare that to Repressa and Roclatan in terms of the retention rates that we're seeing here from a refill level? I think that would probably cut through the clutter a little bit of the hyperemia issue. Thanks so much.

Okay. So, again, let me... try to cover the increase in managed care coverage. So at the very beginning, and certainly a couple of quarters ago, we talked about that we weren't going to be in a particular hurry to sign contracts where we had to give excessive rebates just to get on formularies. And so we think that the last contract that we signed with the managed care organization that I mentioned has about 20% or almost 20% of the Medicare lives you know, that took us about 18 months or almost two years to conclude. And so, you know, the level of rebates that they were asking for just were too excessive. And so, you know, we drove up higher authorizations and made it pretty expensive for them not to cover us and eventually got them back to the negotiating table and came out with a contract that was acceptable to us. As Tom mentioned, we signed that contract in May, and we were able to get quite a bit of pull-through, about a 60% increase in the – market share within that plan. And so once we get to about doubling, then we pretty much pay for all the rebates that we pay off. So they're part of the deal. And so it's that kind of deal that we would be looking for as we try to close the gap between where we are today with Medicare Part D coverage for Rocklatan and where we are with Repressa. There's a number of plans out there that we currently are bidding for and and are looking for those kinds of situations where we can do that. But again, we're not in a particular hurry to just give up rebates just to get coverage and basically kill our price. We're trying to strike that balance. We also have a number of managed care contracts where we're looking at restating those contracts and perhaps giving up a favorable position where we don't think it's actually going to hurt us by taking a step back, paying off a little bit less rebate, and actually increasing our net price within the plan and not losing revenues, in fact, continuing to gain revenues. And so all that combined, I think, will help us. I'm going to have Tom talk a little bit more about the hyperemia rate and as it relates to retention. You know, he's obviously been close to what's been going on in the field recently and can give you a little perspective on that. Tom?

Sure, thank you. And Dan, thanks for the question about hyperemia. Here's sort of what we think about from the hyperemia and really what we hear from our physicians. Certainly one of the first things physicians notice with their products is that they cause hyperemia. What we suggest to physicians is to keep the patients on the bottle, the sample. The sample lasts for at least 30 days. Write a prescription because the longer they stay on the product, most of the time the hyperemia starts dissipating. It doesn't completely go away in many cases. But it dissipates. It becomes very, very manageable. When I ask them about what's our retention rates, do you think, comparing either roclatanin and even ropressa compared to the prostaglandins, they commonly say it's very similar. I wouldn't see a difference. And they start recounting to us things like, well, when the prostaglandins first came out, because they all caused a degree of hyperemia, we had a lot of trouble with hyperemia. Then we got used to it. And then we told patients, hold on, keep using the product. enjoy the fact that you're getting very good IOP control, and sure enough, through time, their eyes got whiter and less red. So I don't know that it's materially different. I mean, I've never had a physician say, no, this is far worse than any product I've used before, if they've used a significant amount of the product. And we always tell the physicians that the more you use, the more you get accustomed to managing hyperemia, and I think the less you'll see in your patients will be happier as well, too. So we don't think it's that big of an issue.

Thank you.

Thank you. Your next question comes from the line of Serge Bellinger from Needham and Company. Your line is now open.

Hey, good afternoon. Vince, can you talk about the business environment right now, given the COVID pandemic? Have you seen any improvements throughout the quarter? I know you mentioned that patient flow at ophthalmologists' offices improved from 75% to 85%. Do you expect that to continue improving into the fourth quarter in 2021?

So, hey, Serge, we do think it's going to continue improving. Certainly we do have some outbreaks occurring in various states, and the various state governors are responding very, very differently to those outbreaks and things like that. And so, you know, it all depends – sort of almost on a state-by-state case in terms of what we think is going to happen. But generally, we think this will continue to improve and more and more practices will continue to expand and open up and gain some balance between sort of where they were pre-COVID and where they are today. What's interesting, we do see about 5% of the practices that simply aren't responding at all. I mean, in the sense that, you know, they're not particularly open or they may not be open at all. And so we can't help but wonder whether that small percent of the total practices are simply going to go and be bought up by somebody in private equity or just simply decide to retire because of the change in the environment. But overall, we think that that's going to continue to progress, and as long as we don't go back to the days of where they shut down elective surgeries, which basically killed ophthalmology or hit ophthalmology harder than any other specialty group, As long as they don't go back to that, I think even on a state-by-state basis, I think we're going to do pretty good. The practices that we do go into are now very, very flexible. Everybody's got their own rules and regs that our reps have to follow when they walk in there. But overall, I like the direction that we're going in. It's very positive.

Okay. And then the second question is just about that. Current payer mix, it sounds like you've made some pretty significant progress with the new Medicare Part D plan. So what is the current Medicare and commercial mix right now?

Rich may have the latest data, so I'm going to give him a couple seconds to open that up. But it is in our latest slide deck that we put out there, Serge. But Rich?

Yeah, so the Part D and Medicaid mix, in the second quarter was 57 percent. And now, at the end of the third quarter, we averaged about 59 percent. So, as Ben said in his prepared remarks, we went up about 2 percent. And that was pretty much at the expense of commercial shrinking a bit and the other government shrinking a bit.

Robert Nussbaum- Sir, the thing to watch for here is sort of the rebound in the economy. You know, we saw a huge increase in the economy quarter over quarter. it depends on how quickly folks go back to work. Because if all of a sudden they start getting coverage under commercial pay, that may also be swinging some of these numbers around a little bit. And don't forget, the more commercial coverage, the better our net price gets. And so that's a positive thing. But again, we're going to watch it closely. But We're still thinking that getting to that balance is a good thing for us, and staying in the high 70s is certainly doable based on where we think the mix is.

And your next question comes from the line of Dana Flanders from Guggenheim and Partners. Your line is now open.

Great. Thank you very much for the questions. I have, you know, first one on a commercial question, and I know this can vary by physician, but just wanted to get a sense from you just for where you think Repressa and Roslitan are generally being used as a line of therapy. Is it, you know, second line, third line, fourth? And then as you think about the market opportunity, how important is it for you to move up the treatment paradigm from where you are now and And what is the active sales strategy and messaging around that? And then my second question on your dry eye candidate, what do you think you need to show and what do you want to show for the FDA to consider this a pivotal study beyond, I suppose, just a clear sign of efficacy? Thank you.

All right. So on the commercial side, I'm going to have Tom give you some more details. But right from the very beginning, we always thought that Repressa would be primarily an adjunctive therapy, so it would be added to whatever regimen the doctor had his patients on. And so depending on whether it was added second or third or fourth, they would have a role to play there. And eventually, as doctors got more experience, that they would move from that repress adjunctive therapy to saying, oh, look, what kind of pressure drops I'm getting and then I'm going to move that, perhaps get that patient off of everything except and move them to Roquitane where they can get the IOP drop with only one eye drop. But let me have Tom give you some details, and then I'll take the call back or the answer back for your dry eye question.

Sure. So what we see with Lopressa to begin with, Lopressa most of the time is added as the third or fourth medication. Now, that's not surprising, realizing that most people have been on glaucoma medications for many years, have gone in on a prostaglandin, started losing control, a second and third drug was added. So that happens to be the biggest opportunity. So that's just because most of the time it's used there doesn't mean that that's where physicians really want to use it. What we're seeing now, though, is certainly physicians are using it more and more often when patients come in just with a prostaglandin, and for some reason they're not going to Roclican. It may be coverage for that individual patient or some other driver. but they are using Ropressa much earlier in the treatment paradigm, and that's clearly what our sales force is talking to physicians about. Not just because they can use the most data to show the effectiveness of it, but also because we think that cuts down on hyperemia, because they're just using less products in their eyes. So that's a nice, sweet spot for physicians, and the more they try it there, I think the more they adopt that. Rochlatan is just, it's very easy. Rochlatan is a switch from a prostaglandin, and instead of adding a second medication, or trying a different prostaglandin, they switch them right over to Roqlatan. That's good as well, too, because there really aren't that many new starts in glaucoma every year. It's really going back into your ability to switch patients instead of starting new ones off is a long-term key to success. So that's really what our messaging is all about.

So the answer on the dry eye side is, remember, this is a Phase IIb study. We are powering it as a three, so we have 360 patients we're going to enroll in the trials and looking at two different concentrations plus vehicle. And so we think that if we get STAT-SIG on both the sign and the symptom, so the sign being the tear production, the symptom being ocular discomfort, that that would serve as a strong pivotal, and then we would only have to do one more study. We are watching pretty closely, or we will be watching closely, the additional information that we get because, as I mentioned in prior calls, we are backing up the truck, looking at all sorts of potential secondary endpoints, looking at using the chamber or not using the chamber, or dry eye chamber, et cetera, just to really be able to, in this one study, fully characterize the activity of the drug because as we move forward, it's not only making sure and certainly that job one is trying to get the drug approved, assuming that everything comes out the way we expect it to, but also make sure we characterize properly because those advantages that we see in the secondary endpoints could certainly help build a strong picture for us as we look at contracting with managed care. Does that help? Yes. Thank you very much. Yes, sir. Thank you.

Your next question comes from the line up front from Oppenheimer. Your line's now open.

Thanks for taking the questions. In terms of the awareness and the effort you've made for... Would you say it was the awareness that was the biggest issue in terms of reimbursement? It seems like docs maybe weren't aware of the wins, especially the win from May 1st. And in terms of making them aware, was this something you had to battle because of COVID or... was this expected to be an educational process for your sales force?

What I can tell you is it's this awareness issue in terms of what kind of coverage we get is probably one of the most frustrating ones that we have because sometimes it doesn't make any difference how many times you tell a doctor that our drug is covered. In fact, both of our drugs are covered for your particular plans that the majority of your patients have. Many times they just don't remember. They remember the early days perhaps where we had limited coverage. I'll give you a great example. When we won this last contract, we made a point of calling all the doctors, especially in the state of Florida, where we had great coverage with this one plan. And the majority of the patients that are on Medicare Part D are covered by this one plan that we just signed. And so there was a doctor that spoke at one of the investment conferences and actually talked about that we didn't have particularly good coverage in his area. And he happened to be in the middle of Florida on the East Coast. And so even though our rep had been in there multiple times, the doctor only remembered that when he first tried to prescribe Repressin-Roclatan, it wasn't covered in all the trials and tribulations he went through with fire authorizations, et cetera. So it is something that is not only frustrating, but we certainly addressed with the pulsing strategy that Tom mentioned, with the use of contract sales organization, and also with telesales. We're using them to not to call the doctors to let them know that we're covered, but to call their staffs to let them know about our coverage. Because we certainly have access to the data that tells us which plans are most important to that particular practice. And so we can target those calls pretty easily. So certainly we've ramped up our efforts. So again, That's where the opportunity is, but it's also been frustrating because even when we get the coverage and tell the doctor multiple times, they still don't remember because they've had busy practices. It's not just because of COVID. It's just part of the way things go.

Understood. Okay. And then lastly, I think touching on the rest of the pipeline, there's a lot going on, especially, you know, not just the pipeline, but internationally and whatnot. So, On the six-month side, on AR1105, that data was clearly very impressive. From there, can you just help us understand a little bit the plans going forward, what potential drug to use? And, you know, once you understand the platform works, what's the next move? And then on the EU side for glaucoma, clearly the market is gigantic. You've got non-inferiority. Can you also help us understand the plan in terms of timing on commercial launch deaths?

Sure. So what I'm going to do is cover off the commercial component of both 1105 and the Glycoma franchise, and I'm going to turn it over to David Hollander to talk a little bit about the next steps on the development of 1105. On the commercial side, let me just put this in perspective. While the Glycoma market in terms of dollars in the EU is is quite a bit less than it is here in the United States, mainly because the prices are so low. We compared ourselves to Ganforth in the Mercury 3 trial, because that is the highest price combination product. And we got non-inferiority, so we think we will get that price, which is in the mid to upper 20s per bottle. As a reminder, there are 110 million bottles of glaucoma medications prescribed, so it's a huge market at very, very low prices. And so... We think that the interest that we've generated will allow us to look at a commercial opportunity in terms of partnering in that space, and so that's going to dictate when we can launch. But assuming we get approval in the early part of 21 for Rocklanda or Rockbatan, as we expect, we're going to be moving pretty quickly to gauge interest and see what kind of deal we can put together for a partnership so that we can launch Rocklanda and ultimately Ropressa into the European markets on a timely basis. A big product in Europe for Glaucoma would be about 125 to 150 million, as I mentioned earlier. So just keep that in perspective. As we think about 1105 in Europe, as I mentioned, the closest competitor that we have is Osudex, and it sells 300 million only in Europe. And our drug works over a longer period of time, for six months, versus Ajudex, two to three months. And so even if we price it the same, we think we can generate huge revenues in Europe as a result of the longer activity. So for us, as we think about it, the opportunity on the retina side with 1105 in Europe is 3x or so larger than the glaucoma. So partnering with somebody who already has a sales force and already can just lay our product on top of their infrastructure certainly sounds pretty attractive. If we get up into the hundreds of millions of dollars, let's say $150 million in Europe with, say, Rocklanda, translates to about 5 million bottles or so. Well, if that's what we get, it certainly takes care of a lot of our capacity in the Athlone facility, so that's a net positive for us. And so, again, we're very excited about both, but one we certainly expect to partner, meaning the glaucoma. The other one with 1105 is something that we want to make sure that we maximize the opportunity for ourselves there, and it may be that we do the whole thing, including commercialization. So with that, let me turn it over to David to talk a little bit about next steps on 1105. David?

Yes. Thank you, Vince. So you saw from our press release, we were studying two different formulations of these bioerodible implants. We were very excited. Both implants showed very strong efficacy. One of the implants showed a little bit longer duration, which is the one we're going to go forward with. The six-month threshold is something that investigators have been looking for for quite some time, so we think that this is a huge accomplishment. We are already... preparing to meet with regulators both in Europe as well as the U.S. to discuss development plans across posterior segment diseases, so not just RVO, which we had looked at in this first study, but across posterior segment diseases. As you know, Ajurdex and dexamethasone and steroids in general are used for a number of different diseases of the retina. We are looking ultimately to harmonize the program, so essentially the same trials for both Europe and the U.S. We're going to have to get agreement from the regulators on comparators and study duration, but we should have that in the coming months, and we look forward to having a harmonized program across both regions. Hopefully that answers your questions.

No, it does. I've heard about the six-month sweet spot for many years now, so congrats on that, and thank you. That's it for me. Thank you. Great.

Thanks. Thank you. Your next question comes from the line of Greg Fraser from Truvi Securities. Your line is now open.

Thanks, folks. How much of the interactions that the sales force is having with prescribers is face-to-face? I'm guessing there's a lot of variability across territories in terms of the access that the reps are getting. And can you comment on how overall touchpoints, both in person and virtual, compare now with pre-COVID levels?

Sure. I'm going to have Tom do that.

Sure, I'd be happy to. First off, about 86% on our last report of our interactions with physicians are face-to-face. The other 13% are virtual. So we're very happy with that number, and that number has been increasing month by month by month, but it's very, very good. From an overall activity or, quote, number of calls we're making, I won't give the exact number of calls we're making for competitive reasons. I can tell you that we're very close. to the pre-COVID numbers, meaning January is a good month. Comparing now to where we were in January, we are just a little shy of where we were in January, but certainly within shouting distance, very, very close to it. So overall, we're quite happy with the reach that our sales force is getting and the receptivity that they're getting from the physicians.

Got it. That's very helpful. You've been growing share in what has been a pretty challenging environment for new products. but what do you need to do and what can you do to accelerate share growth, particularly if we don't get back to a more normal environment for some time?

Well, we certainly think that the approach that Tom has already laid out, which is the pulse strategy where we're focusing our own sales force on a very specific portion of the audience that are doing a terrific job and growing share there and growing it faster, then had we not used the pulse strategy and really limited the number of of doctors that they need to call on. And so we think that that was a very important first step. The second great step and decision that was made was to bring in a contract sales organization to pick up a number of the physicians that our own sales force was not going to call on. And as you heard Tom mention, the CSO came on board in July of this year and has already done a great job of growing market share within the physicians that they call on. So it is paying off. Third one is the use of the telesales, and that's got two components. Number one, they certainly are calling on the doctors. They're sort of the lowest prescribers, and they're reaching out to those and getting started and having great success in getting those doctors to write prescriptions for either Repress or Roccatant. So we're happy with that, and it's an easy and very inexpensive way of reaching them and one that we can expand easily. One of the most important roles we're asking that group to play is what I mentioned in my response to one of the frustrating things that we have about making sure doctors understand what kind of coverage we have. Using telesales to call on doctors' offices, not necessarily to talk to the doctor, but to talk to their staff about the kind of coverage we have in their particular area, is, we believe, critical to making sure that we don't lose script because the doctor remembers the days when we weren't covered. And so we think that those are the kinds of things we have to be able to do to continue getting the pull-through that Tom mentioned we had in this plan that we signed in May where we've seen a 60% increase in our market share within that plan in a very, very short period of time.

Great. Thanks for taking the questions.

Yes, sir.

Thank you. Your next question comes from the line of from Citigroup. Your line is now open.

Hi, this is Kevin Becker on for . Thanks for taking our questions. On net pricing, can you provide some color if it's reasonable for us to expect a comparable increase in net revenue per bottle from $94 net in 3Q19 to 120 net in 4Q19? due to end-of-year Medicare Part D coverage gap impact? I'll take that.

Yeah. So, I wouldn't really be looking at those trends from last year. Yes, last year was our first full year of having to manage through the coverage gap. But, Kevin, the way we account for the coverage gap exposure is we accrue it evenly through the year. And now, of course, we have much more experience than we had last year, so you shouldn't be anticipating any significant quarter-over-quarter impacts on net revenue per bottle based on the coverage gap dynamic in the course of the year.

Okay, great. And about your new partnership with Santan. Can you clarify the conditions or breakdown under which AIRI is eligible in excess of 25% of product net sales? How should we think about the net royalties for the products in Japan?

Go ahead, Vince.

We're only divulging a certain component, Kevin. you know, we've agreed with our partner in terms of the kinds of things we can talk about. All we could say is that, you know, it's up to greater than 25% royalty. A portion of that is going to be the COGS component, and the balance is going to be royalty on our intellectual property. And so as, for example, our COGS go down, the overall cap on or the actual royalty number stays the same, so the royalty component for the IP stick goes up. And so that's as close to sort of a detailed explanation that we can give you without actually giving you stuff that we're not going to divulge.

Okay, that's very helpful. Thank you very much.

Thanks. Thank you. Your next question comes from the line of Louis Chen from Cantor. Your line is now open.

Hi, thanks for taking my questions here. I had a few. So first question I have for you is how should we think about that $50 million coming in in the fourth quarter? How is that going to be accounted for? And then you mentioned this EU collaboration a few times. When do you think we'll hear another update? Could it be before the end of the year or is it more a 2021 event? And last question I just had here was just how we think about unemployment in 2021 and if that will impact any of your reimbursement for your products. Thank you.

So let me talk about the EU, and I'll do the unemployment thing. I'm going to have Rich talk a little bit more about the accounting on the 50 million. So relative to the EU partnership, again, these were mainly inbound calls that just started shortly after we got the Mercury 3 data. Pretty consistent with what we saw in Japan when we announced the Phase 2 results over there, and all of a sudden we started getting the inbound calls. The difference between the two is when we were looking at the Japanese data, it was specific for that market. even though on the Santan deal we ultimately negotiated for Korea and a number of other smaller countries. Currently, the inbound call is principally for Europe, but certainly among the many areas that folks want to talk about, some of them want to do European only, others want to do Europe, but are also asking questions about China and the Middle East and Latin America and things like that. The honest answer is it's going to depend on how complex the deal ends up being and how many territories are included, et cetera, in terms of what the timing is. It took us roughly a year to go through and get everything done, or actually not quite a year to get the Japanese deal done, so hopefully it doesn't take that long. And we'll be able to move through a little bit faster than that, but it's until we get everybody into the data room and see sort of how complex of a deal they're talking about relative to territories and things like that. It's a little bit too early to tell how long and can we guide you for that. But certainly there's no way that we're going to be able to sign it between now and December or the end of December. So that much I can tell you. And let me just have Rich talk to you about the $50 million deal. I'm sorry. Let me do the unemployment thing now. So we think that the unemployment has impacted the movement of patients into other sorts of conditions where some of them just lose it all altogether and they're stuck with having to pay cash, which is the ultimate nightmare scenario for those patients, or they move into Medicaid components and some other government programs, et cetera, et cetera. And so we think that The unemployment rate numbers relative to reimbursement of our products sort of have played out now, and so we do see that we've seen those hits, if you will, as we get to that high 70s net price per bottle. So I don't think that that's going to be impacted dramatically on a going forward basis. If all of a sudden we have another 30%, 40% increase in the unemployment In the economy, in the fourth quarter, perhaps you'll see more folks going back to work, and we'll see some more folks being covered by commercial plans, and our net price goes up a little bit. But we think that the ballpark of that high 70s sort of gives us a pretty good area to be in, at least for the time being. So that's on the unemployment. So let me have Rich talk to you about the accounting on the 50s.

Hi, Elise. We're still evaluating the accounting on the 50 this quarter, but it is probable at this point, based on the work we've done to date, that, of course, we'll put the cash on the balance sheet. It's unfettered cash. And we'll probably take the offset not to revenue, but to deferred revenue on the balance sheet. So it'll be matters to the balance sheet. I'll say this slowly again, since I've been speaking slowly tonight. Do not put revenue on in your model for the fourth quarter for the Santan deal.

Thank you.

Thank you. Thank you. Your next question comes from the line of Nick Rubino from Stifel. Your line is now open.

Good afternoon, everyone. This is Nick on for Annabelle. Congrats on the quarter, and thanks for taking our questions. First off, this may be a little earlier optimistic. But what do you think might change in the trajectory for repressor raclatan in a quote-unquote normalized environment? Any changes in your initiatives or expense structures? And then secondly, with several dry eye programs emerging in the landscape, where do you see your TRIP-M8 inhibitor fitting in? Is it acute, chronic, pre-steroid, with steroid? And at what level of patient severity? Thank you.

so on the repressor rocket and commercialization efforts and things that you know we've gone through the various steps here and we talked about the contract sales organization be added to our own guys and and then on top of that we added telesales I think that and and Tom during his prepare remarks talked a lot about the the the continued movement and and the of some of the programs that we've been running so some educational programs and though So we think that that general mix is going to stay the same. The sole exception, at least in my mind, is going to be on that incremental support on the telesales side because we've got to do whatever we need to do in order to make sure that the doctors understand that our products are covered. That's the single most important thing that that telesales team is going to be able to do to supplement the efforts of both our own field folks as well as the CSO. So we don't see dramatic changes in the cost structure associated with that, but certainly those are the components. We'll continue with our own sales force, continue the contract group, and if anything, build out the sales team or the tele-sales group, but that is also the lowest cost option that we have. We will continue the the manpower promotional components and the educational programs and things like that. But given, as Tom mentioned, the level of activity we've seen in that, I don't think it changes our expense structure dramatically. On the dry eye side, we think that the unique mechanism of the drug in terms of basically the cold-sensing receptor in the eye is it becomes a big deal because we do know that the drug works. You know, it's just like you walking out on a really cold, windy day and immediately your eyes tear up. Well, that's the receptor we're talking about. And so as it cools down, the eye feels better. And so that's where we get the improvement in the symptom side in addition to the increase on the tear production side. We see our drug working as a standalone drug. we see our drug working in conjunction with other drugs, whether it's Restasis or Zydra or Sequa or any of the other products that are out there or if they've got a patient that they're trying to get on Restasis or Zydra and they provided a run-in with a steroid, we're not going to negatively impact the use of those. I think it's going to be as we think about those 30 million patients out there where we're only treating two or three, you know, two, two and a half million of them, there's a bunch of them that aren't getting treated, maybe because the drugs that they've tried aren't working or maybe they use one prescription or another. We think that many of them will give this drug a shot, especially if we're able to replicate in our Phase II beach studies or in our clinical trials or going forward clinical trials the same results we saw in the Phase IIa. And so, again, we see it used pretty broad-based. And in terms of the severity, it's a little bit too early to tell. But, again, we think that the mechanism plays well across a number of different fronts here. And I think this is going to be driven mainly by patient acceptance, individual patient acceptance, as opposed to any broad gauge of mild, moderate, severe patients.

All right. Got it. Thank you very much. Yes, sir.

Thank you. Your next question comes from the line of D.K. Young from Mizzou. Your line is now open.

Thank you. This is Dan Clark on for D.K. Just one from us. Following the coverage win in 2Q20, how should we think about the potential further uplift in volumes from that win over the next several quarters and any further implications to net price from that deal for the remainder of the year and into 2022? Thank you.

So we think that the continued penetration into that particular plan is going to continue to grow. As I mentioned earlier, you know, we're up 60%, or Tom mentioned we're up 60% already after just a few months. We think that that trajectory will continue to grow. We've got folks that are up 2.5x from their baselines. And so, you know, we think that there's an awful lot of room for growth and continued growth. And we see that, by the way, across all plans because the things that we're doing in the plan that we signed back in May are we're duplicating across the country with all the plans where we have contracts. And as I mentioned, it's telesales activity to making sure people know that what plans we have coverage in will spread that out over the country. So we hope that those revenues will continue. We're not making any projections about Q4. I've got to tell you that we do see – some pretty nice growth already in terms of our net sales out from wholesalers to retail. And we report those out. And you can see sort of the trajectory of those numbers in our latest slide deck that we put up on the site. And so again, we do see that occurring. But making projections at this point, we're not quite ready. And as I mentioned, the only thing that we don't know is are we going to see, because of some spike in one state, sort of a contraction of the business there or a handful of those states. And so that's the only reason why I can't actually be predictive about this. And so that does make it a little bit more difficult for us. And in terms of the impact on that price, we've seen most of the hit already relative to the newest contract. And so anytime that we sign another big deal, just like the one that we signed back in May, we'll tell you about it and we'll let you know whether that's going to have any kind of impact on that price. But we're being pretty careful about the kinds of deals we sign just to make sure we balance out the opportunity relative to growing the business if we're going to give up rebates. And so for now, I think we're We've got a pretty steady hand on this thing, and that upper 70s is as good a number as we can give you right now. Great.

Thank you.

Yes, sir.

Thank you. There are no further questions at this time. I would now like to turn the call over back to Vince Anita, ARIES Chairman and Chief Executive Officer, for final remarks.

Thanks, Jerome, and thanks, everybody, for the questions. And I know you're in a busy time, and I appreciate you taking the time to listen to our call. We think that we had a great quarter and served everything from a commercial point of view in terms of what we've been able to do with the repression in Rakuten, along with building the pipeline and looking at the prospects for products like 1105 out into the marketplace is great, and then also continuing to build our overall company with the international efforts, and that Santan deal was a a great first step and are looking forward to seeing, you know, we can duplicate, um, uh, the success there, um, as we start talking about Europe and other territories. And so we're excited about, um, everything that we've been able to accomplish. We certainly are excited about the financial prospects. I don't have to talk as slowly as Rich did, uh, in terms of making sure that you understand. I think you do that, you know, we had a great financial quarter, right? So, uh, you know, adding, uh, The upfront payment from the Japanese deal on top of our cash balances combined with the continued growth of our revenues along with control on expenses, that certainly has led us to low cash burn rates. And we're excited about being able to perform that way and look forward to doing so on an ongoing basis. So again, thank you for the time and have a good evening.

Thank you. This concludes today's conference call. You may now disconnect.

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