Albireo Pharma, Inc.

Good morning and welcome to the Alvareo Pharma Inc. fourth quarter and year-end 2021 earnings call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note that this conference is being recorded. I'll now turn the call over to your host, Paul Arndt, Managing Director of LifeSci Advisors. Thank you. You may begin.

Thank you, Operator, and good morning, everyone. Thank you for joining today's call. This morning, Albareo issued a press release highlighting its recent business accomplishments and reporting its financial results for the fourth quarter and year-ended December 31, 2021. This press release is accessible by the company's website at www.albareopharma.com. Before proceeding, we would like to take note that management's comments today may include forward-looking statements regarding the company's plans and expectations. These statements are being made under the Private Securities Litigation Reform Act of 1995, and they are subject to various risks and uncertainties. Actual results may differ materially due to various important factors, including those described in the risk factors section of our most recent Form 10-K and our subsequent SEC filings. These filings can be accessed from the Media and Investors section of our website at albareofarma.com or on the SEC's website. Any forward-looking statements represent our views as of today, Tuesday, March 1, 2022, and should not be relied upon as representing our views as of any subsequent dates. We undertake no obligation to publicly update these statements. Now, it is my pleasure to turn the call over to Ron Cooper, Albareo's President and Chief Executive Officer. Ron?

Thank you, Paul, and thank you, everyone, for joining us this morning. With me today are Simon Harford, our Chief Financial Officer, Pamela Stevenson, our Chief Commercial Officer, and Dr. Jan Matsen, Chief Scientific Officer and Head of R&D. So, when we step back and reflect on 2021, it was a historic year for Alvareo. It really was one for the record books where our journey to bring a new first-in-class medicine to children and families managing the high burden of rare disease was realized with the approval of Bill Bay in both the U.S. and Europe. Last summer, this approval transformed our company from a clinical stage company to one with an approved product that is building an integrated biopharmaceutical company. Barrios, a company with a tremendous amount of growth potential across three different drivers of value. First, the global Bilbao launch in PFIC. Second, the expanded use of Bilbao in allogel syndrome and biliary atresia with our phase three assert and bold studies with the goal of adding two additional indications. This would allow us to provide a new treatment option for the approximately 100,000 colostatic liver disease patients worldwide towards our ambition to make Bilvay a billion-dollar product in the second half of the decade. And third, the rapidly emerging early-stage products. So let me begin by speaking about the Bilvay PPIC launch. To date, we are only going in one direction, starting with delivering on a fast update. As reported in our press release this morning, we ended 2021 delivering $7 million in Build Bay product revenue. Original guidance for 2021 was 3 to 4 million. We updated this at the start of the year to 6 to 7 million. So we're thrilled to deliver on the high end of the range. Pamela will tell you a bit more about the drivers of performance, but the key takeaway is, The response from prescribers is terrific. We're hearing from both HCPs and patients that Bilvay is making an impact, and we're seeing a fast launch update. We expect to continue to see growth from these initial patients, as Bilvay is a chronic therapy with weight-based dosing. And as patients continue to grow, they will increase their daily medication. Building on that base, we will continue to initiate new patient prescriptions netted against some discontinuations each quarter in the U.S. and Germany. And then beyond those two opportunities for growth, as the year progresses, we're planning for additional country launches in Europe as pricing and reimbursement is achieved, like most recently in the U.K. So overall, our opportunity with BuildVac continues to grow with the potential for great impact on families who are caring for children with cholestatic liver disease. To get into more detail in the launch, I'll turn it over to Pamela to take you through key metrics and achievements. Pamela?

Thanks, Ron. I'm really pleased with the progress that we have made with Bill Bay. The response from healthcare providers and payers and the impact on patients has been outstanding. The ongoing feedback from physicians is that they are relieved to have a drug option for their patients and payers are supporting the unmet need by recognizing the value of Bill Day and covering it. To date, the launch is going as planned, and we are delivering on our global strategy with a fast launch uptake to reach the estimated 2,500 PFIC patients who are available for treatment. In Q3, we outlined our five key metrics we plan to report on a consistent basis. So let me go through these five metrics and provide a little bit of color for you. Starting with the total net product revenue, we reported a total of 1.1 million in Q3 with 800,000 in the U.S. and 300,000 internationally. We finished out the year at 7 million in total net product revenue with 5.3 million in the U.S. and 1.7 million in international. Overall, our performance to date represents the solid penetration in the U.S. market and international sales beginning to be significant with Germany leading our European launches. Our second metric is number of new prescriptions. These are total new prescriptions generated in 2021. As you may recall, these are new prescriptions with some still going through the reimbursement process. As we reported, we had 28 new patient prescriptions in the Q3. Then we saw prescriptions to continue to grow with 65 in Q4. We totaled 93 new prescriptions worldwide by the end of 2021. This number of prescriptions generated this early in the launch period clearly reflects the unmet need and the interest in the market. Moving to the number of patients on bill day. We had 14 patients on reimbursed bill day in the third quarter, meaning these are new prescriptions that have been approved by payers and product has shipped. Through end of year, we were very pleased to see we added another 39 patients to arrive at a total 53 patients with approved reimbursement and product shipped for 2021. This is a strong indicator that our Alvareo Assist patient support team model is working as planned and that payers understand the clear value of Bill Bay. The decision to have an in-house patient services team is a significant advantage in gaining access and supporting each family to navigate the reimbursement process, all of which have contributed to our success in driving prescriptions and getting patients on drugs. Physicians are already seeing the advantages of our alboreosis program based on their first experiences, and they recognize the value this brings when interfacing with insurance companies and our three specialty pharmacies to evaluate a patient's insurance benefits and gain quick access to Bilvay. The next metric is the number of potential rollover patients on Bilvay. As a refresher, This captures the number of patients who are currently on drugs and available to transition to commercial sales in the future. Patients included in this number are currently in the PEDFIC II Extension Study, our EAP, or our Managed Access Program. In Q3, we reported 100 rollover patients, and at the end of the year, we had around 90 patients. demonstrating our ability to transition patients quickly to commercial bill day in our reimbursed launch markets, U.S. and Germany. With time, we expect many more of these patients to roll over as we gain pricing and reimbursement in Europe and continue to transition these patients to commercial sales. The last metric is unique prescribers in the U.S. In the third quarter, we reported 19 prescribers, And we more than doubled that in the fourth quarter to end the year with 51 unique prescribers. We are making great progress, showing immediate breadth and building a solid base of physicians who now have experience with BuildA. We are penetrating the new market successfully by generating multiple prescriptions by prescribers, and I'm really happy with our reach to date and continued engagement with the remaining targets. While we are pleased with the launch momentum, we are even more excited about the prospects of a successful 2022. Priorities are to deepen our penetration in the U.S., gain pricing and reimbursement in other countries, and increase sales of BuildA as we launch around the world. In the U.S., the key to performance is execution and continuing to reach the physicians and centers that have not yet prescribed BuildA. while also reaching patients and families to ensure awareness of bilve as the first drug option for the treatment with TPIC. We feel confident in our ability to grow prescriptions in the U.S. and obtain access for patients. We expect sales to increase as our patient base from 2021 increases in value as those patients continue to grow. Then we add new patients, less discontinuations, and less the expected launch inventory that we will continue to work through, and new country launches, which added together, sets us up well for a successful year ahead. As we look at global pricing and reimbursement, our goal is to ensure patients have access to Bill Day while achieving reimbursement at a price that reflects the value of Bill Day. In Europe, we are actively pursuing pricing and reimbursement with ongoing discussions in 13 countries. Very recently, we announced that the National Institute for Health and Care Excellence, or NICE, issued guidance that recommended BuildA through the HST pathway. This was the fastest HST evaluation ever, and we believe that ultimately the recommendation came as a result of the high unmet medical need the work that we've done to create a compelling data package, and the high degree of expertise and execution by our team, who have been preparing for pricing and reimbursement for many years. This is the first country in Europe that has assessed Bilve from both a clinical and economic perspective, and we are confident that this will have a positive impact across other countries that are in the assessment period. In France, Bilve has received and SMR important, and ASMR3 from the Haas Transparency Committee, which is exceptional and encouraging as we now have multiple independent health technology assessment organizations that have recognized the gold standard clinical program and data for bill bags. While we remain confident in our ability to gain pricing and reimbursement in major countries such as France and Italy, We do not know when we will gain final approval for reimbursement and what the net price will be. As the year progresses, our intent is to continue to launch in additional European countries, and this will be an important driver of growth for 2022, with the majority of the approximate 90 rollover patients residing in Europe. Given the very solid start, our key actions to penetrate this estimated 2,500 global PFIC patient opportunity are focused on HCP outreach and education, moving prescriptions through to reimbursement, gaining market access in new countries, and expanding our geographic footprint. So with that, let me turn it over to Ron.

Super. Thanks, Pamela, and congratulations to you and our entire Albreo team for our next one launch. Overall, it's clear there's a significant unmet need, and BILVE is making a difference. as we advance our plans to make BILVE a billion dollar product, the key for us to take BILVE from a PFIC drug to a leading pediatric cholestatic liver disease drug. So how do we achieve that? First, we'll continue to penetrate in PFIC, building on our base quarter by quarter. Depending on your net pricing assumptions, we're looking at an acquisition of about 3,000 to 4,000 patients of the 100,000 pediatric cholestatic liver patients in the world to deliver a billion dollars in sales. Expansion beyond PFIC is the second goal as we continue to be confident in the high level of translatability of our gold standard PETFIC base 3 study into other diseases and pipeline programs, matched with our ability to commercialize the drug. Therefore, we're looking forward to an important Phase 3 readout this year with the pivotal ACERT study in algea syndrome, remaining on track to deliver top-line data by the end of the year. ACERT is a gold standard, double-blind, randomized, placebo-controlled study that both the FDA and the EMA have agreed would be sufficient for approval with a positive outcome. Also on track is our gold standard and the only phase three double-blind randomized placebo-controlled study in biliary atresia called BOLD. We know that biliary atresia is the largest pediatric cholestatic liver disease, and we have great potential to be able to deliver another first drug treatment option to this patient group in need. BOLD is a study of 200 patients randomized to build by our placebo. It's studied over a two-year time frame. For a number of unknowns, executing the first global phase three trial in biliary atresia with an IMBAT, given that this is a trial for patients who are babies that have not been born as yet. So we're really proud of our ability to execute and effectively enroll more than 50% of the patients by the end of 2021 and expect to complete enrollment this year. Reiterating our guidance for top line data readout in 2024. Third driver of value for our organizations are rapidly emerging early assets. We have two unique, one-of-a-kind products with A3907 and AT342. A3907 is the world's first and only high systemic bioavailable ASBP inhibitor in clinical development. So what does that mean? In our preclinical models, A3907 removed bile acids from the body, not only by the stools to the intestines like other IVAD inhibitors, but in the urine through the kidney. In our phase one study, we were able to demonstrate excellent systemic exposure and good tolerability. The next key question is if we can replicate systemic effects in humans with disease, and we plan to demonstrate this in a phase two study, which we anticipate starting by the end of this year. We also have A2342, which is the world's first and only oral NTCP inhibitor. Today, a subcutaneous peptide NTCP inhibitor is currently available in the EU, and it's an effective drug, but you have to inject yourself every single day. We look at the development for A2342. It's tracking completely like the subcu NTCP inhibitor in that the potency of NTCP and the effect on markers or target engagement are similar. However, The major difference is that A2342 is a small molecule and has excellent systemic exposure after oral dosing in preclinical models. We need to demonstrate similar tolerability and safety profile as the sub-QNCCP inhibitor, allowing us to advance A2342 into a Phase I study by the end of the year, with the intent of proving to be a unique component of a combination treatment for hepatitis B or D. To derive this plan, We also have great strength of our leadership and full organization that has spent their careers launching products and growing commercial biopharmaceutical companies. In order to maximize the potential for our assets, one way we're leveraging our capabilities and experience is with our recent creation of the Chief Business Officer role and the appointment of Konstantin Tchernopoulos, who joined us in December. Prior to joining our organization, Konstantin was with Boston Pharmaceuticals, where he completed over 20 licensing transactions, and before that with Sanofi Genzyme. Konstantin, in partnership with our enterprise team and key leaders in the organization, will be evaluating new opportunities to accelerate our plans and for expansion as an integrated biopharmaceutical company. Overall, we have a tremendous opportunity with our three growth drivers. First, with Bilve in PFIC. Second, with the expansion of Bilve into other cholestatic liver diseases with our two additional phase three clinical programs. And the third driver being our early assets in adult liver disease. It's exciting to be part of Alvareo as a company with a first in class and first to market product for near term growth. with strong candidates in the pipeline as we plan for the future. With that, it's now my pleasure to turn the call over to Simon for a financial update. Simon? Many thanks, Ron.

Let me summarize our financial results for Q4 and the full year 2021. Build A product revenue was $7 million for the year ended December the 31st, 2021, at the top end of our guidance range of $6 to $7 million for the full year. due to Build A patient sales and some inventory stocking at our three U.S. specialty pharmacies. U.S. revenue was $5.3 million, and international revenue was $1.7 million for the full year. Fourth quarter Build A product revenue was $5.9 million, with U.S. revenue of $4.5 million and international revenue of $1.4 million. Royalty revenue was 18.6 million for the year ended December 31st, 2021, compared with 8.3 million for 2020, an increase of 10.3 million. Royalty revenue was 11.6 million for the fourth quarter of 2021, compared with 2.7 million in the same period of 2020, an increase of 8.9 million. The increase for both the quarter and full year relates to higher estimated royalty revenue and achievement of an $8.6 million milestone to be received from EA Pharma to Elabixabat for the treatment of chronic constipation, which is passed on to healthcare royalty partners. License revenue is $15 million for 2021 due to cash received in Q4 related to the upfront fee from the recently announced deal with J-DITE the licensing rights to BuildA in Japan. There was no license revenue for the year ended December 31st, 2020. Cost of product revenue was 1.4 million for the full year and 0.9 million for the fourth quarter. Following BuildA approval, certain manufacturing and quality headcount costs are now included in cost of product revenue. There were no material costs as materials related to current products sold were expensed prior to approval. Given Bill Bay was only approved in the summer of 2021, there was no cost product revenue in 2020. R&D expenses were $82.5 million for the year ended December 31st, 2021, compared with $76.8 million for 2020, an increase of $5.7 million. The increase in R&D expenses for the full year 2021 period were primarily due to the Build A Pivotal Phase III studies for biliary atresia and allogeal syndrome, as well as A3907, offset by preclinical expenses and in the previous year, completion of the PEDVIC1 study and the Elabixabat Phase II study in NASH. Q4 2021 R&D expenses were $20.6 million, compared with 20.1 million in the same period of 2020, an increase of half a million dollars. SG&A expenses were 69.6 million for the year ended December 31st, 2021, compared with 42.4 million for the previous year, an increase of 27.1 million. SG&A was 19.7 million for Q4 2021, compared with $14.2 million for the fourth quarter of 2020, an increase of $5.6 million. SG&A expenses were primarily made up of commercial expenses related to sales and marketing, as well as the necessary support functions as we increase commercialization activities related to PILVAE. The increases for both the full year and fourth quarter of 2021 were mainly attributable to a ramp up in headcount in our US and European commercial operations. The increases were also due to the need to put in place appropriate people and systems to ensure efficient operations for the long term and appropriate governance as we evolved to a commercial stage biotech on a global basis. Net loss for the year ended December 31st, 2021 was 34 million, or a loss of $1.77 per share compared to a loss of $107.6 million or a loss of $6.73 per share for the previous year. Net loss for the fourth quarter of 2021 was $11 million or $0.57 per share compared to $24.8 million or a loss of $1.30 per share in the prior period. As of December 31st, 2021, the company had cash and cash equivalents of at least $248.1 million. In fact, we did have exactly $248.1 million versus $262.6 million as of the end of September 2021. We are reiterating our guidance that current cash is sufficient to last into 2024 based upon our current revenue and expense projections. For the first quarter of 2022, we anticipate BuildA product revenue to be between $5 and $6 million. At the appropriate time during the year, we will look to provide full-year BuildA revenue guidance once we have better visibility on the timing of launches in European markets. However, when you think about the outlook for BuildA revenue in 2022, We expect a hockey stick with higher revenue in the second half of the year as we gain reimbursement and launch in a number of international markets and continue to roll patients over to commercial sales. Some end of 2021 inventory will potentially reduce in Q1 2022 at the three US specialty pharmacies in the US. Price per patient. It's likely to change based on weight gain, but total net price could be lower with more European launches beyond the current free pricing in Germany. And we expect a high persistency rate. However, there will inevitably be some discontinuations. We will continue to monitor the early launch metrics and are anticipating a very strong year. With that, let me turn the call back over to Ron for closing remarks.

Thank you, Simon. Before I turn it over to Q&A, let me summarize what we expect for 2022. We plan to fulfill our commitments and deliver on quarter-over-quarter bilve growth as we add patients and launch in additional countries. We plan to announce the full enrollment of both the ASSERT and BOLD Phase 3 studies as we remain on track with our development timelines. We expect an important Phase 3 readout of ASSERT by the end of the year. We also expect to advance A3907 into a Phase II proof of concept study and A2342 into humans for the first time by the end of the year. I am very proud of our organization's ability to deliver and execute as planned and thank each and every one of our employees for their commitment, drive, and innovation. We thank everybody for joining us and are pleased to open the call now for Q&A. Operator?

Thank you. If you'd like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you'd like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Our first question comes from the line of Yun Yang with Jefferies. Please proceed with your question.

Thank you. Can you comment on what was the inventory level at the end of last year?

Hi, Yoon. This is Simon. We did have some inventory for the launch uptake, as I mentioned, at the three US specialty pharmacies in Q4, as we actually recognize revenue when we ship to those pharmacies. That inventory is likely to wash out for the most part during the first quarter of this year. And there was no inventory of any relevance in the international markets. So I think what you're asking is how do you use a baseline to model going forward? So in terms of trying to understand 2022 revenue, the 53 patients who are on drug, who are reimbursed at the end of 2021, using average net prices is probably a good baseline of which to project further growth projections. But inventory will fluctuate up and down by quarter, so we're not going to get into every detail quarter by quarter, but that's the situation.

Okay. And then you mentioned that sales are going to increase rapidly in the second half of this year. as you launch in additional countries and reimbursements coming on. But that said, current consensus is about 48 million bill-based sales for 2022. Can you comment on how do you feel about the consensus number?

Honestly, at this stage, it would be premature, as we've said, to provide revenue guidance, given the uncertainty around the timing of launches in international markets due to pricing and reimbursement. I mean, the good news is clearly that we think we're making really good progress with pricing and reimbursement. And I think that the NICE recommendation was a really strong endorsement of both the innovative nature of the product and our care of burden information as well as our management capabilities in that area. So we feel good about that. The question is timing, and timing can swing things depending on when it happens in the year, and that's why we're saying, you know, we'll give further guidance at a point for the full year when we have more visibility, but clearly you would anticipate To see more of that being on the back end, just given the nature of when those launches are likely to come.

And I think the other factor to think about you, and there's two swings in this, right? That Simon has indicated when those launches occur, and we'll have better visibility on that as the year goes on, and those discussions are going very well, like Simon's indicated from a nice perspective. But also, one of the other metrics we report is the patients that are potential rollover patients. And there's about 90 of those individuals. The majority of those are in those international markets, right? And so as we get pricing and reimbursement, they will roll into commercial, and that will have a pretty significant impact on our revenue.

Okay. My one last question. So patients who got on Bilve commercially, how many of those have discontinued? Thank you.

Thank you.

Yes, hi. We've seen a handful of discontinuations, yes. This is very much in line with expectations. There's no real pattern that's emerged. It's a bit of a dynamic measure. And, in fact, some of the patients that have discontinued are considering restarting.

Thank you. Thank you. Our next question comes from Lyon of Ritu Baral with Cowan & Company. Please proceed with your question.

Hi, guys. Thanks for taking the question. Have you started seeing, now that we're a handful of months out, have you started seeing any trends in time to fill as we look at the difference between NRXs and NRXs shipped? And also, are you seeing some new trends, unexpected trends, expected trends in those NRXs? not just in 4Q, but in first quarter 2022. Things like you mentioned on our previous call, community-based prescriptions, young adults versus children, et cetera. Thanks.

Let me answer your first question on the average time to fill. We are having great success in getting patients through the system and on to reimbursed bill day. We continue to see a wide range of cases coming through, and we're able to pull some prescriptions through very quickly, and others take a few weeks to go through the process, right? The prior authorization appeals in some cases, and it's exactly as we expected, and we're really pleased that we've been able to get the 53 patients on to reimbursed bill day.

And then I think the second part of what you're asking, Ritu, is sort of the trend of the patients and who are prescribers, right? And I think what you see is we're just aligned, first of all, to almost more than double the number of prescribers, right? And so that suggests that we're really starting to penetrate deeply in the U.S. We're seeing that same trend where the majority of the patients are at those tertiary centers, but we are seeing some folks in some places You know, that our secondary place at the centers and, like, Kansas, or in North Carolina, where we're seeing really good prescription uptake is as well. And then, you know, to characterize the patient is pretty much gone as we, as we, as we've expected. Right. The majority of the patients are PPIC-Q patients, but we get a wide range of patients and a range of ages and weights as well. But we're really pleased that, in fact, we're getting really good penetration from the physician base and that the early response with the patients that have been initiated has been really terrific.

Got it. Thanks. Thank you, Rita.

Thank you. Our next question comes from the line of Brian Scorney with Baird. Please proceed with your question.

Hey, good morning, everyone. Thank you for the question. I was hoping to maybe pull you guys to get some granularity on the 1Q22 guide of $5.6 million and just kind of the assumptions that are underpinning that. I mean, I hear the inventory build may be a bit of a headwind for 1Q, but even if I kind of assume like a three-, four-week build an inventory last quarter and normalizing NRXs in the U.S. It just kind of seems like that should offset. So I'm just trying to understand, you know, are there other sort of headwinds beyond inventory that you would be guiding for a flat-to-down quarter? Thanks. So, hi, Brian.

This is Simon. I think it's fair to say that, yeah, beyond some of the sort of fluctuations in inventory – Really, there's not anything more really to say about Q1 because I think what is highly relevant here is you have 53 patients initiated on drug as a baseline at year end. And I think as you think about the year going forward, you really need to sort of think about those patients at an average net price and then some growth off that, but there's nothing beyond the sort of the normal inventory fluctuations that I would have to say about Q1's 5 to 6 million.

Okay, and then maybe if I could just add one question on the ALGS opportunity. How should we be thinking about differences in weight between ALGS and PfeC patients? And given that Assert is testing just the 125 microgram per day dose. How should we be thinking about that eventual pricing dynamic? It would seem like there's a potential for average price in ALGS to be substantially higher than that in PfeC. Thanks.

Thanks for both of your questions, Brian. I think right now, if you look at the baseline weight of the eligible patients, it's pretty similar to the PfeC patients. We are using the 120 microgram dose in that You know, and I think, you know, let's wait and see until we get the results. You know, let's wait and see, you know, what the market looks like at that. We'll kind of sort out from a dosing and pricing perspective, you know, at that time.

Thanks for your questions, Brian. Great. Thank you.

Thank you. Our next question comes from the line of Tim Lugo with William Blair. Please proceed with your question.

Thanks for taking the question. And going back to the Q1 expectation, does that five to six million assume any European, I guess, reimbursement decisions over the next month? And if one does come through, I guess, does that materially change that? And maybe on the pipeline, can you just maybe comment on the bold study and, you know, how you came to decide using the proportion of patients undergoing liver transplant as your primary endpoint versus a

So, I'll take the first question. Hi, Tim. In terms of Q1, it does not assume any additional launches beyond Germany because, in fact, with the recent recommendation from NICE, which would be the UK, obviously, would be the next one in the queue, and that takes roughly up to 90 days before we actually get on the market, so there isn't any included run.

Yeah, so in regards to BOLD, look, we're pretty excited that we've made a lot of progress, you know, with BOLD. You know, we're now over 50% enrolled by the end of last year, and so we're right on track. To your question about endpoints, it's pretty simple, right? We've had a discussion with both the FDA and the EMA. We said to them we'd like to get an approval for this product. We talked to them about multiple scenarios and multiple different endpoints. But they said to us that they wanted an unequivocal endpoint. The proportion of patients said no. you know, that are alive or have their native liver at the end of two years. And we're doing what those regulatory agencies want. So we're pretty excited about the potential, you know, for the treatment of bitter re-atresia patients with Bilvay. And we're looking forward to announcing full enrollment of the bull trial sometime this year.

Great. Thank you. Thanks, Tim.

Thank you. Our next question comes from the line of Ed Arcee with HC Wainwright. Please proceed with your question.

Great. Thanks for taking my questions. Just a few for me. Firstly, just wondering how you're thinking about and projecting any ongoing impacts from the COVID pandemic through 2022. Well, I think, Ed, you know,

COVID is just part of our lives and part of our business, right? So we've had this in the background, you know, as we try to prepare for launch. We've had this in the background as our representatives have been reaching out to physicians. We've had this in the background as we try and bring up sites for a certain bold and as we try and enroll patients in that. And I think what you've seen from this team is that we just deal with it, right? And we focus on on executing, we focus on delivering as planned, and if you look at the history of this organization, we've been able to do that and we plan on doing that in the future as well.

Right, right, of course. I guess what I'm getting to, Ron, is if in fact, as many people hope and perhaps expect sometime later this year, there's a significant diminution of restrictions, and everything else from the pandemic, would you necessarily expect any sort of discrete increase in, say, prescriptions or ultimately sales, any sort of step up that could be pointed to from that change? Thanks.

No, Ed, we don't expect any change. It would be sort of business as usual. Okay.

All right. And then, I'm wondering how to think about COGS through this year. I know you mentioned earlier that, or I think Simon did, that inventory is likely to wash out sometime this quarter. But when would you expect the COGS to sort of normalize as you build from newly manufactured product? And is a 90% gross margin a reasonable assumption?

So I'd say the following. If you think about what our cost of product revenue, or as you refer to it, COGS, is made up of currently, it's made up of really two key components. One is certain manufacturing and quality headcount costs. And obviously those individuals are sort of a stable number of people, so a relatively fixed allocation to COGS. The remainder would be made up of product material costs. And product material costs at this stage are zero. And the reason for that is because we expensed the material that we are currently using prior to approval. In the future with new lots, that material will get allocated to COGS. But that's a ways down the road at this point in time. So that's not something you really need to worry about for 2022. But clearly, by definition, given we're giving an allocation of headcount and manufacturing costs, as your revenue goes up, you would expect that that allocation as a percent of revenue to fall over time. And to your longer term question, we haven't given explicit guidance, but suffice it to say in rare disease relative to price, obviously this is a fairly attractive margin product.

Right. Okay. Fair enough.

And then just final question on the royalty revenue. Of course, your quarterly royalty revenue turns over to EA Pharma. But I believe the $8.6 million milestone is retained by you. Is that correct?

No, that's not correct.

That gets passed on to health care royalty partners. Okay, great.

Thanks so much.

Thank you, Ed.

Thank you. Our next question comes from the line of Andreas Argarides with Woodbush Securities. Please proceed with your question.

Good morning, Annette. Thanks for taking our question. So it looks like you added 29 new patients, those, well, let me rephrase that, patients that were not on are rolled over from the 100 that you originally identified as rollovers. How are you thinking about the 90 patients going on to drug for the remainder of the year? Thanks.

Hi, Andreas. So we have, as you mentioned, approximately 90 rollover patients worldwide. And these are mainly international patients, as we've already moved most of the U.S. patients onto commercial drug, right, because they're rolling off the PedFix2 clinical trial. So this is a large number of patients who are on product who would be ready to roll over to commercial drug as we get the reimbursement in each of the upcoming countries. So we're excited about that number and working very hard on the reimbursement negotiations, as mentioned.

Okay, so just to follow up, you can't provide any guidance as to, you know, or pace of adding these patients on, or is that, you know, is it 10 patients, you know, per quarter a fair assumption, or how are you guys guiding or estimating that?

Well, it sort of connects, you know, to the comment that Simon made earlier, Andreas, you know, we really need to get pricing and reimbursement in those countries, right? So if we were to get pricing and reimbursement in a large country in, say, for example, the middle of the summer versus the fall, the patients in that country that are part of the 90 would roll over relatively quickly. If it was in the summer versus the fall, that would be quite a difference, right? So until we have line of sight pricing and reimbursement, which by the way, as Pamela's indicated, is going very well. We expect that to occur.

Until we have a line of sight of that, it's really hard for us to predict how and when those patients roll over.

Okay, and just another follow-up to that. As part of your year-end forecast, this uptick in the second half of the year, are you anticipating that to come from those rollover patients coming on, or are you looking at the population outside of the rollover?

Well, all three drivers, right? So the first driver of value for us, the patients that we exit the year on, right? Those 53 patients are going to grow over time. The second thing that's going to occur is we'll continue to deepen our penetration in the U.S. and Germany where we have access. So that will grow over time. And the third driver is what we've just been talking about, right? Pricing and reimbursement in other countries and the rollover of those 90 patients into commercial.

All right. Thanks for that. I'll jump back into the game. All right. Thanks, Andreas.

Thank you. Our next question is a follow-up from the line of Yun Yang with Jefferies. Please proceed with your question.

Thank you. I have two follow-up questions. So Phase III data in Allergies Syndrome is expected by end of this year. What's kind of a current expectation for approval timeline, and do you expect some off-label usage before approval in 2023? And then second question is more clarification. So for last year, there are 53 patients on the drug. Does that exclude the number of patients who discontinued, or does that represent the number of patients who initiated the drug? Thank you.

Pamela, why don't you take that second question, and then I'll talk a little bit about a cert.

Yes, I'll take the second question you asked, was the 53 patients, that is inclusive of the patients who have discontinued. And as I mentioned earlier, it is a handful and it's a bit of a dynamic metric in that some of these patients are considering restarting.

Then as it relates to ACERT, we're pretty excited. We're almost going very well. We expect data by the end of the year. The ACERT filing or the LGL filing in the U.S. will be a supplementary and a variation in Europe, so relatively quick timeline. As you would expect, we do not promote anything off-label at Alvareo, but we've already received a number of off-label prescriptions generated by physicians.

Thanks for the question, June.

Thank you. Thank you. Ladies and gentlemen, this concludes our question and answer session. I'll turn the floor back to Mr. Cooper for any final comments.

Thank you, Operator. Thank you all for attending today's conference call. We'll keep you updated on our three value drivers as we continue to advance Alvareo's mission to provide hope to families of patients with liver disease and the entire liver community. Thank you all for your continued support and have a great day.

Thank you. This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.