Antares Pharma, Inc.

Ladies and gentlemen, welcome to the Antares Pharma 4th Quarter and Full Year 2021 Financial and Operating 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. If you would like to ask a question, please press star 1 on your telephone keypad. I would now like to hand the conference over to Tram Bui, Antares Vice President, and Corporate Communications and Investor Relations. Please go ahead.

thank you operator and good morning everyone earlier today we announced our fourth quarter and full year 2021 financial results and operating achievements a copy of the press release and slide presentation for today's conference call are available in the investor release relations section of the entire pharma corporate website before we begin i'd like to remind listeners that some of the statements made during this conference call will contain forward-looking statements within the meaning of the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Examples of board looking statements include those related to our future financial and operating results, including our expectations regarding the impact of the ongoing COVID-19 pandemic on our overall business, operating results and financial condition, our ability to achieve our 2022 revenue guidance, future revenue growth, prescription volumes, product launches, and market share for our products, and our partner products, FDA actions and potential regulatory approval for our products and for our partner products, timing and results of ongoing and future development programs and clinical trials for our products and for our partner products, future actions by our partners, and future business development efforts. These forward-looking statements are subject to certain risks and uncertainties, and actual results could differ materially. They are identified and described in today's press release in the accompanying slide presentation on slide 2 and in the company's filings with the SEC on Form 10-K and as updated in Antares' recent periodic filings on Form 10-Q and Form 8-K. Antares is providing this information as of the date of today's 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. This presentation will also include reference to non-GAAP financial measures. These measures are used by management to evaluate the operating performance of the company over time. They should not be considered in isolation or as a substitute for GAAP measures. A reconciliation of our non-GAAP measures to the nearest GAAP measures can be found in our earnings release. Joining me on the call today are Bob Apple, President and Chief Executive Officer, Fred Powell, Executive Vice President and Chief Financial Officer, Dr. Peter Richardson, Executive Vice President, Research and Development and Chief Medical Officer, and Joe Render, Senior Vice President of Commercial. Let's review the agenda for today's call on slide three. Bob will begin with a review of our overall business and accomplishments in 2021 and then hand the call over to Joe to provide an update on our commercial achievements and strategy for our proprietary portfolio. Dr. Richardson will then discuss our R&D pipeline and initiatives before handing the call back to Bob to provide a review of our customer business. Fred will then go through the detailed financials and Bob will conclude with closing comments before opening up the line to your questions, which we ask to be limited to two questions per caller. Please turn to slide four, and then I will hand the call over to Bob Apple. Bob.

Thanks, John. Good morning. Thank you for your interest in our fourth quarter and full year 2021 results and operations update. We are very excited to report another record year with outstanding financial and operating results. In 2021, NTARI successfully executed on our strategic initiatives, and we believe we have built a foundation for continued growth. We believe our financial and operating results for the full year spotlight on the overall strength of the company, as well as highlight the potential future growth opportunities we have across our proprietary and partner business. For the full year, our total revenue increased 23% year-over-year to $184 million, which puts us at the midpoint of our revenue guidance range of $180 to $190 million. We also generated almost $40 million in adjusted EBITDA and substantially improved our balance sheet with almost $66 million in cash as of the end of the year. I'm extremely proud of the accomplishments we achieved across the entire organization despite another challenging year due to the ongoing pandemic. Throughout the year, our commercial team continued to build and maintain strong physician relationships that helped drive the 34% annual revenue increase in our flagship proprietary asset, Ziosted, to over $62 million. We also worked relentlessly to support the strong demand for Tevis Generic EpiPen, which contributed approximately $70 million in annual revenue. As we forged more balance between our proprietary and partner business, these two assets were foundational to our growth in 2021. We also executed on our strategic objectives to expand and streamline our proprietary portfolio focus, which supports our strong growth expectations in 2022. First, the in-licensing of Palando gives us the opportunity to compliment Zyestad with an oral formulation of testosterone, which has been tentatively approved by the FDA. We intend to leverage our expertise and success in the testosterone market support the launch of tolando and drive market share gains with our broader offering with the fda's acceptance of our nda submission resubmission for tolando we look forward to the march 28th paducah date any final fda approval we are excited to launch in the second quarter with an expanded commercial organization at the end of the year we completed the divestiture of Otrexa, which was a non-core legacy asset that we introduced back in 2013. This divestiture allows our commercial team to focus their call points with urologists and endocrinologists, while at the same time, strengthen our balance sheet. Overall, we expect our proprietary portfolio with Ziosted, Talando, and Nocturna to be core to our future growth. As we look ahead, we expect our 2022 revenue to be in the range of $200 to $220 million and does not include any unapproved products such as Tolando or Tevis Frateo. During the past year, we also made significant advancements in the development of our pipeline, particularly ATRS 1902 for adrenal crisis rescue. Completing our IMD filing in the third quarter of last year allowed the company to initiate and subsequently report positive phase one results. In addition, the FDA's recent fast track designation was further validation for the unmet need for this rescue pet for those suffering from adrenal crisis. Our advancements of 1902 highlights our commitment to our research and development as well as the opportunity to continue to leverage our platform technology with ATRS 1901 and the recent introduction of ATRS 1903. Our advancements on our internal pipeline were bolstered by the progress in our partner pipeline of products, led by the initiation of a Dorsius Phase III program for the Salada Grow Heart Attack Rescue Pen. We anticipate these internal achievements, coupled with the potential opportunities that remain with our partner business, to provide a strong foundation, which we expect we will continue to grow. As the organization continues to expand and flourish, we have built a leadership team that has cultivated a high-performing culture where our employees are critical to our ongoing success. With that, I am excited to welcome Claude Richardson, who recently joined Antares as our Senior VP of Human Resources. I look forward to leveraging his proven ability to develop and manage an HR strategy that will help drive performance and support our future growth. Let me now hand the call over to Joe to provide an overview of our commercial achievement and provide more detail on our commercial strategy for our proprietary portfolio.

Joe? Thanks, Bob. And good morning, everyone. I appreciate the opportunity to join today's call. Throughout the year, the commercial organization successfully supported the growth of Zysted and Nocturna while managing Atrexa up until its recent divestiture. With a 27% increase in annual revenue for our proprietary products in 2021, the team effectively reached physicians and patients despite the challenges throughout the year due to the pandemic. first with the Delta variant and then with Omicron as we closed out the year. Physician access fluctuated from quarter to quarter as well as it did from region to region, but overall we were able to maintain a roughly 60-40 split between in-person and virtual detailing in the fourth quarter. The commercial team remains committed to balancing their physician reach effectively and efficiently especially with more focus as we enter the new year carrying now a more compelling bag with the opportunity to complement Ziosted with Tolando and also with Nocturna. As you can see on slide five, the overall testosterone replacement therapy market remains strong with 8 million prescriptions annually. The split between injectables with nearly 6 million prescriptions and gels with approximately 2 million prescriptions in 2021 really supports the excitement and opportunity to grow Zyestad as well as introduce Tolando in the second quarter of the year. Let me first focus on Zyestad, which remains one of our leading growth drivers. Zyestad's total prescriptions increased year over year from approximately 34% in the fourth quarter and 45% for the entire year. You can see that in slide six. Although the pandemic persisted throughout the year, we were able to close out the year on strong footing with our highest weekly prescriptions that actually happened in the month of December. By the end of the year, we also expanded to over 90, or actually to 90 field representatives to enable us to get to even more prescribers in new geographic markets. And they continue to penetrate and grow our prescriber base to now more than 11,000 physicians. We remain pleased with a fairly consistent split between new patients and switches in the fourth quarter, as well as throughout 2021. As we look ahead, we continue and expect to continue to drive prescription growth for Zyostat. The only easy to use, painless subcutaneous injection for testosterone replacement therapy or TRT. And we expect to continue to hit weekly highs with prescriptions in 2022. With that said, we also believe physicians and patients prefer different options, which brings me now to Tolando, an oral formulation for TRT that we unlicensed in the fourth quarter. In anticipation of the final FDA approval for Tolando on its PDUFA date, which is March 28th, we're excited to potentially launch commercially in the second quarter of this year. In preparation, we're expanding the commercial organization by approximately 20% as we enter the new year. With this new headcount, we expect to reduce territory size and efficiently detail the larger metropolitan areas in order really to reach more potential prescribers. Throughout the year, we also will be working hard to ensure appropriate market access for Tolando, which we anticipate over time to be similar to that of Zyestad, which is currently covered by approximately 75% of all commercial lives. With our upcoming national sales meeting in the second quarter, we expect to use this venue as a launching platform to train the commercial organization on detailing Tolando and really building their expertise so that they can demonstrate themselves as experts in that TRT space, now offering a portfolio of treatment options. We expect to market Tolando to physicians and patients as complimentary to Zysted. Zysted is convenient once weekly injection, And it's an option with a compelling clinical profile. Talando offers an oral treatment alternative, particularly for those men who would not choose an injection as their first option. And we believe that the almost 2 million prescriptions for the gels in 2021 are a prime target for Talando, given the challenges specifically with daily application and the risk of transference to their children or their spouse or significant other. We also believe Tolando has several positive product attributes, such as strong efficacy profile, no requirement for titration, which really means your starting dose is your maintenance dose. Physicians in our focus groups have expressed the need for a simple oral product that doesn't need to be titrated. And as such, we are in the process of building a comprehensive launch strategy inclusive of market research and message testing, which we are in the place of building as we speak. The opportunity to have both Zyestad and Philando in the Salesforce's bag this year gives our team the ability to offer both options to physicians and their patients, and it allows them to choose what best suits their treatment needs. We believe our growing commitment and expertise in the TRT space will support our market share gains and revenue growth in this market. We also remain committed to continue to grow Nocturna. With the official commercial relaunch of Nocturna during the pandemic in March of 2021, we saw prescriptions remain stable throughout the remainder of the year due to the longer sales cycle that we believe is needed so that we can educate physicians and patients on nocturnal polyurea. In the fourth quarter, we started to see a pickup in prescriptions as our branded consumer and provider digital campaigns enhanced our sales and marketing tools made a bigger impact as the year progressed. As we look at 2022, we have seen Nocturna prescriptions pick up in the first quarter of the year. Looking forward, we will have a bigger, stronger commercial organization in 2022, which we believe will enhance the growth of our proprietary portfolio with Ziastead, Colando, and Nocturna. We expect to continue to build and leverage our physician relationships with Ziastead as a simple, convenient TRT option, while Tolando offers a compelling treatment alternative. We believe that Nocturna, the opportunity, will also continue to contribute to our growth as we educate physicians on identifying the appropriate patients. We are excited to embark on yet another year with a more competitive bag to offer our physicians and their patients. And with that, I'm going to hand the call over now to Dr. Peter Richardson. Peter?

Thank you, Joe, and good morning, everyone. I'm very pleased to be able to highlight the significant progress we've made on our clinical development initiatives in 2021. Let me begin my discussion on ATRS 1902 for an adrenal crisis SQPEN shown on slide seven. The FDA acceptance of our IND for 1902 in the summer allowed us to initiate the phase one study according to plan. Right before the start of the fourth quarter, We dosed the first subjects of this study with a proprietary liquid-stable formulation of hydrocortisone without the need to reconstitute the product. The crossover study in 32 healthy adults was designed to establish the PK profile of ATIS1902 compared to Solucorta, the reference-listed drug, and to evaluate the safety, tolerability, and pharmacognetics of a liquid-stable formulation of hydrocortisone and given by intramuscular injection. Now, with the positive results we just reported earlier this year, we expect to initiate the pivotal PK clinical study using the new device, named VI, shortly in the second quarter. And if we assume the successful completion of this study, along with another human factor study, to further demonstrate the relative ease of use of our autoinjector under simulated stressors, We continue to target filing the 505B2 NDA with the FDA by the end of the year. With the development of 1902, we introduced the VI, which is a new proprietary auto-injector platform that demonstrates our ongoing commitment to rescue therapies for an underserved patient population. This new device platform offers a simple, convenient injection versus the current multi-step standard of care, which is both cumbersome and can be challenging for patients and their caregivers, particularly in a time of crisis. The opportunity to provide an essential treatment that can be easily administered for a potentially life-threatening situation remains a core focus of our research and development efforts. And we're particularly encouraged by the positive feedback we've received from North American-based patient groups supporting adrenal diseases. as well as the FDA's grant for fast track designation for this asset. We believe the FDA's fast track designation underscores the urgent need for an improved therapeutic option for these patients. And we look forward to working collaboratively with the agency on this program's continued development. As a reminder, the fast track designation process is designed to accelerate the development and review of treatments for serious and life-threatening diseases where no treatment exists or where the treatment in discovery may provide advantages over what is currently available. We believe the open communication with the FDA will prove beneficial to the potential success in 1902. AsterAIDS 1901, our second internal pipeline asset for once weekly auto-injector in uro-oncology We will be advancing the preclinical studies of this program throughout the year. We anticipate completing a study in Healthy Volunteers under an ex-US clinical trial authorization in order to select the doses to be explored in later patient studies under an IMD, which we expect to be filed with the FDA shortly thereafter. We're also pleased to be able to announce a third development program, HRS1903, for an emergency use rescue pen to be used in an acute immunologically mediated reaction We recently completed the formulation work for this asset and expect to conduct a phase one proof of concept study for this program later this year under an ex-US clinical trial authorization, which we believe will allow us to file an IND with the FDA thereafter if successful. This expansion of our development pipeline supports our strategic initiative to continue to grow our proprietary portfolio by leveraging our formulation expertise and auto-injector technology with an emphasis on rescue therapies. We remain committed to developing better therapies for patients and physicians with this more robust pipeline. And as we start a new year, we look forward to moving many of these programs forward. With that, I'll now hand the call back over to Bob.

Thanks, Peter. While we continue to grow and expand our proprietary portfolio, we also have a strong partner business that remains extremely valuable to the company. I'll start with Teva's generic EpiPen on slide eight. Our total partner royalty revenue increased 77% to almost $38 million in 2021, which was primarily driven by Teva's EpiPen. Total prescriptions for Teva's generic EpiPen increased year over year, as well as from pre-pandemic levels. And when you combine the mass vaccination centers that required EpiPens during the vaccine rollout, there was a heightened demand in 2021. Although our suppliers were not immune to the staffing issues that affected almost every organization worldwide, we were pleased with their ability to manufacture millions of Epi Auto Injectors and support the overall strong demand. As we start the new year, we expect Teva to maintain their market-leading share while we also rebuild their safety stock of our product. We share in Teva's belief that the EpiPen is a durable generic and believe that the opportunity for generic Fratello will also soon bear fruit. Of course, we continue to anticipate the potential approval for Fratello. But as I mentioned earlier, we have decided to exclude any unapproved products from our 2022 revenue guidance in order to remain conservative. As for the undisclosed rescue pen with Pfizer, we continue to work on this development program in 2021, and we expect to continue to develop this product for an NDA submission. which was targeted to be filed with the FDA last year. I would note that we still believe that there have been no adjustments to the market opportunity and need for this rescue pen, but rather Pfizer's priorities shifted in 2021. During 2021, we continue to support the Dorsey's advancement of their Saladagro Heart Attack Rescue Pen to a Phase III trial, which they initiated last year, and expect to continue to enroll throughout this year. We remain excited about this potential future opportunity and wish them, as well as all of our partners, continued success in their development programs. Overall, we believe that our technology platform will continue to support Antares' position as a leader in rescue pens and combination products. I'll now hand the call over to Fred for a detailed review of our financials. Fred?

Thanks, Bob, and good morning, everyone. I'm very pleased with the significant financial improvements that we've achieved across both our income statement and balance sheet throughout the year. For both the quarter and full year of 2021, we achieved record revenues. For the three months ended December 31st, 2021, our revenues of almost $49 million was 10% above the same period in 2020. For the full year, our total revenues increased 23% year over year to $184 million, putting us right in the middle of our revised guidance range of $180 to $190 million. In addition, our net income was over $46 million. Excluding the gain on the sale of Atrexa, our adjusted net income was $17.7 million, or 10 cents per share, which was more than double our adjusted results for 2020. Another significant accomplishment we achieved in 2021 was the termination of our venture debt with Hercules Capital. and the reduction of our outstanding debt from $40 to $20 million. Our new credit facility with Wells Fargo has allowed us to significantly lower the interest rate on that remaining debt by almost 75% compared to the beginning of 2021. After generating almost $37 million in cash from operations in 2021, we are starting the new year on strong financial footing with almost $66 million on the balance sheet. And that excludes the remaining $26 million due this year from the sale of Otracep that was completed in December. Let me now provide a more detailed review of the financial results for the fourth quarter and full year, which brings us to slide number nine. Total revenue was $48.7 million for three months ended December 31st, 2021, a 10% increase compared to $44.1 million in the same period in 2020. The 12 months ended December 31st, 2021, total revenue was $184 million, a 23% increase from $149.6 million for the comparable period in 2020. Sales of our proprietary products, Zalz, Devo, Traxip, and Nocturna, generated revenues of $21.5 and $80 million for the three and 12 months ended December 31st, 2021, as compared to $19.7 and $62.9 million for the three and 12 months ended December 31st, 2020. The nine and 27% increase in the proprietary product sales for the three and 12 months ended December 31st, 2021 compared to the same periods in 2020 were principally attributable to continued growth in prescriptions and sales of Zosted. Royalty revenue was 8.4 and $37.7 million for the three and 12 months ended December 31st, 2021. compared to $5.3 and $21.3 million the same periods in 2020. The substantial increase in royalty revenue in 2021 was primarily attributable to an increase in royalties from Teva on their net sales of generic EpiPen. Our gross profit was $29.8 and $115.7 million, representing gross margins of 61% and 63% for the three and 12 months ended December 31, 2021, compared to $25.1 and $86.5 million, or 57% and 58% gross margin in the same periods in 2020. The increases in gross profit and margin in 2021 were primarily attributable to the increases in Zosted sales and Epiroyalty. Research and development expenses were $3.9 and $14.5 million for three and 12 months ended December 31st, 2021, as compared to $2.3 and $10.1 million for the comparable periods in 2020. The increase in research and development costs in 2021 was attributable to our ongoing internal development programs. Selling general administrative expenses were $18.7 and $73.9 million for the three and 12 months ended December 31st, 2021, as compared to $16.7 and $62.8 million for the comparable periods in 2020. The net increase in SG&A expenses in 2021 was primarily attributable to expenses associated with the relaunch of Nocturna, as well as an increase in sales and marketing expenses that had declined during the height of the pandemic. Net income was $32.7 million, or 19 cents per basic and diluted earnings per share, and $46.3 million, or 27 cents and 26 cents per basic and diluted earnings per share, for the fourth quarter and full year ended December 31st, 2021. which includes the gain of $38.6 million on the sale of Old Traxip. Adjusted net income for the fourth quarter and full year of 2021 was $4.1 million, or $0.02 per adjusted diluted earnings per share, and $17.7 million, or $0.10 per adjusted diluted earnings per share, which excludes the gain on the sale of Old Traxip. The company generated cash from operations of $36.6 million for the 12 months ended December 31st, 2021. And as I touched upon earlier, as of December 31st, 2021, our cash and cash equivalents were $65.9 million compared to $53.1 million as of December 31st, 2020. Earlier today, we announced our 2022 revenue guidance of $200 to $220 million. As Bob has mentioned, Our revenue guidance excludes products which have not yet been approved. And remember that we also did complete the sale of Ultrexa in December. Excluding 2021 Ultrexa proprietary revenue, our guidance represents a year-over-year growth rate of 18% to 30%. In 2022, we expect to continue to invest in our growth, specifically for the potential launch of Talando and the development of our internal pipeline. we believe these investments will enhance our future growth. I'll now turn the call back to Bob for closing remarks. Bob? Thanks, Ray.

Overall, we were quite pleased with our performance in 2021, despite a pandemic that persisted throughout another year. We believe our strong revenue growth, EBITDA, net income, and cash generation, driven by Ziosted, Tevis Generic EpiPen, and the rest of our diversified business of proprietary and partner products, all demonstrates the breadth of our organization. As we continue to grow the organization and enhance our capabilities, we remain committed to supporting our growth trajectory with the expansion of our proprietary portfolio with new products such as Talando, as well as supporting the development of our pipeline with ATRS 1902, our adrenal crisis rescue pen leading the way. Finally, we also expect to continue to execute on corporate development and still have multiple opportunities to potentially supplement our future growth with our partner pipeline. We appreciate the strong performance and hard work of our employees, and we look forward to another record year. Again, thank you for your interest. And operator, you can now open the lines up for questions.

Ladies and gentlemen, if you would like to ask a question, please signal by pressing star 1 on your telephone keypad. As a reminder, please limit yourself to one question and one follow-up question. Once again, star one for questions. We will begin with Elliot Wilber with Raymond James.

Thanks. Good morning. Encouraging to see continued upward trajectory in Zio's Dead prescriptions, I guess, kind of in light of the challenges that emerged. In December, in the early part of the year, just first for Joe, could I maybe just sort of get your perspective on kind of where things stand in terms of relative visit levels amongst your key prescriber specialties versus sort of what you had been anticipating. And then also where things stand in terms of the relative detailing mix. I think you mentioned last call or a couple calls ago that you were basically at sort of 60-40 in person versus virtual. Just wondering how that trended over the fourth quarter and is currently trending And then just a bigger picture follow-up question for Bob here on BD priorities. Maybe just talk about what your priorities are over the balance of the year. I mean, the company seems to be approaching an interesting inflection point in its evolution. Obviously, you've got a much stronger balance sheet than you've ever had in the company's history. And certainly, the biopharma funding environment here is going to present a lot of challenges for probably an extended period of time. So it just seems like it's opening up a lot more potential asset opportunity for you guys and just trying to gauge sort of how you're seeing the BD flow and the environment evolve here and whether you may consider actually taking on a little bit more development regulatory risk as you look to bring in additional assets in the portfolio. Thanks.

Great. Yeah, I guess I'll start, Elliot. Thanks so much for the question. And You know, candidly, obviously, with Ziestad, what we saw happen last year, first with Delta, certainly created some challenges for us because, obviously, both physicians' offices became a little bit more challenging during that time, as well as, obviously, patient volume. And then we started to see a little bit of a comeback as that kind of subsided, and then, obviously, Omicron kind of hit us at the tail end of the year. So we definitely saw an impact as it relates to physician access. That became more challenging for us certainly in the very beginning of this year. We saw that. The good news is though now we're seeing the opposite begin to happen. So we are beginning to see obviously with the patient volume beginning to pick back up, that's just good news for us. And as Omicron continues to subside, that continues to be good news for us from an access standpoint and patient standpoint. You asked about kind of the split. Yeah, the 60-40 we think is still a good, healthy split for the brand. Obviously, as we see more patients coming back into the offices, we're anticipating that new patient starts should be impacted positively by that. We're still seeing about 30% of the business come from urologists, about 20% coming from the endo group. There is coming from primary care GPs. So that's a little bit of kind of what we saw, and certainly if that didn't answer your question, I'm happy to give you more, but I'll kick back over to Bob and then see if we answered it.

Thanks, Joe. On the BD priorities, I think that for the balance of the year, we continue to look at assets and we continue to look at ones that are a little bit earlier than even commercial assets. We have the ability and the flexibility to maybe take on some development a little bit earlier where it's a phase 3 that's already been completed or a phase 2 that's moving into a phase 3. But I think what's interesting for us is that when you look at our focus with Zysted and Talando and now Nocturna, the bag is relatively full for endo and urology and the good news is that we also have products in development right now that are going to go into that bag in the future. We have a the adrenal rescue pen, which is an endocrinology-focused asset, and then we have the uro-oncology asset, which is obviously going to be focused on urologists. And so I think we have a really strong pipeline to continue to make sure that that bag for that commercial team who calls on the endos and the uros has a full complement of products as we move forward. So when we look at business development right now or corporate development, we're looking beyond urology and endocrinology because of the good state of our current focus on ePendo and Euro. We have another rescue pen that we announced, 1903, which gives us a new area of therapeutic indication where we can start focusing on potential other assets to bring in, whether they're commercial or some development asset, in anticipation of building that small sales team, which will be kind of an add-on eventually as we get that 1903 across the goal line. I think that we're really focusing on niche products, niche areas, specialty areas where we can effectively detail with 50 to 75 reps. But right now, we have an amazing amount of opportunities that are being presented to us because I think what you said, Elliot, that there is a tough financing environment for some of the earlier stage companies. There's a tough financing environment for single product companies. And so it's given us a lot more opportunities potentially execute on those you know on the balance of this year or the next year so it's probably the biggest business I've ever seen it in the history of our company as far as corporate development opportunities and we're being very selective like we were with Talando like we were at Nocturna I think that now we have the ability to go beyond just urology and endocrinology again in a very you know disciplined way in a very you know structured way that you know, doesn't stress your organization and make sure that we continue to be profitable, continue to be cash flow generating so that we can continue to look at these types of opportunities.

And, Elliot, one other thing I didn't get a chance to clarify on your message, I think I missed one thing you also asked about, which was the time between in-person and virtual, kind of how we're seeing that play out. Beginning of the year definitely saw, obviously, you know, leaning more heavily on the virtual side and and less on the in-person side because of Omicron. But now we are beginning to see some states' offices open back up. We have some that are upwards of 80% in-person versus virtual. I will say that what we are guiding our team with is to really continue to find ways to access our customers in-person because that's our preferred method of engagement. But we're still continuing to leverage our virtual capabilities, and actually some of the digital things we did last year and are doing again this year have really showed some positive impact. So we're going to continue to push hard on our digital campaigns this year as well.

So I'm sorry I didn't get a chance to answer that part of your question. We'll now move to our next question, and that will come from David Amselem with Piper Sandler.

Thanks. So just a few. So I wanted to drill down more deeply on the top line guidance. So with Atrexip out of the portfolio, I guess is it safe to say that you're factoring in some degree of contribution from Nocturna? Maybe talk about how that's reflected in the guidance. And then on Zivestead, can you talk about some of your assumptions that underlie the guide as well. I know you're not providing product-specific guidance, but maybe talk to how you're thinking about volumes, how you're thinking about the gross to net on Ziosted. And then just switching gears a bit, as the footprint of Ziosted grows, can you just talk about the payer landscape and the extent to which it might evolve, potentially become more restrictive or not. But just wanted to get your general thoughts on how you're seeing the payer landscape precisely play out, not just for 2022, but longer term. Thanks.

Thanks, David. This is Fred. A lot of items to cover here as looking at our guidance as well as what makes it up as well. You're right. When we take a look at our guidance, it's our approved products, right? It's the approved products that we have as well as our partner products that we have as well. And Nocturna is certainly an area that we're focusing on this year. We expect we will see significant growth in Nocturna in 2022. And as Joe was mentioning, we're pleased to see the growth that we're seeing with the scripts in Q1, which is great. But know it we continue to believe that long-term asset that has value for us and we will see you know as I said significant growth there I can't give you a range because as you know we don't break out the amount that we have for each individual item there when it comes to Zalstead there that's probably the asset that we're looking at obviously the greatest dollar growth year over year is As we mentioned, we've expanded the sales force. We've taken it from the sales reps that we started with in 2021, which was around 80, grew that during the year, where right now we are focused on 108 sales reps. We've split up the sales territories as well to focus on major metropolitan areas as well as those areas that we were successful. We knew there was more business we were leaving on the table. So by adding the reps, we're going to be able to to get those doctors there. So we're looking at the growth really there in Zalstead with the additional reps, with the additional reach that we will have, providing us the increase in their revenue. The coverage, though, we're expecting to remain constant. We're very satisfied with the coverage we have. You know, with the major PBMs, we're in the mid-70% coverage for Zylestad. We think we can maintain that, but it's a challenge. As you mentioned about the gross to net, that's a constant challenge that I think all pharmaceutical companies suffer from or are challenged by, and we're not unique. You know, when we started with the product, we were at one level for rebates, and that's only continued to increase as the market has improved. has gotten much as the PBMs that continue to consolidate, right? If you go back to when we launched, we had six or seven different PBMs and providers that really covered our product. Really now it's consolidated down to the big three that we have. And it's always a focus every year as to how do we maintain the focus that we have to have the growth to net that we have, but continue to keep the coverage that's out there. When you take a look at our numbers for 2021 and 2022, I do think that we will probably have a slight decline in our gross net as we see the rebates only going in one direction, and that is up. We tried to limit it, the amount that it goes up to, and also allow us to have some price protection so we can continue to increase our prices for Zosted. But that is a pressure. That is a pressure. So as we take a look at the number of units we're selling today, Clearly, we need to continue to expand the units to get a similar level of revenue that we had in the prior years. We're not looking at dramatic change in gross to net, and it may stay flat, but it may go down a little bit there.

I was going to just add, if you don't mind, Fred, just you mentioned about Nocturna. I just would mention that two or three things we saw happen last year with Nocturna that really did make an impact. We're now beginning to see the fruits of that labor pay off is we launched a digital campaign in the middle part of last year, which we're seeing really good results with, that helps spread the news and the word about nocturnal malaria, which we know is an important component. And then the second really key marketing event that we did was peer-to-peer programs. So we did educational programs with speakers that could help physicians better understand kind of how to identify these patients, and then also provided our field team with voiding diaries that you can give to physicians to help them identify these patients in their practice. All those things kind of hit the ground in the latter part of last year, and that's, I think, part of the thread point about why we're seeing a little bit of a nice increase this year so far. So we anticipate to see, you know, things continue to go in the positive direction with Nocturna. And the only other thing I was going to mention with Zysted is Obviously that 75% coverage we have comes at a price, but that access is important. That combined with our partnerships with specialty pharmacies throughout the country, regionally as well as nationally, helps also getting those patients through that process of getting on therapy. It definitely hits the growth to net, but in some regards it's also a positive because it helps get access to the brand.

Okay, helpful. Thank you. Now moving to a question from Stixie Koo with Cowden & Company.

Hi, good morning. Congratulations on the progress. Appreciate all the details and thanks for taking our questions. So first, another product-specific follow-up on guidance. Appreciate your prepared remarks around Teva's partner, EpiPen. Just to further clarify, it sounds like 2022 should continue to be a strong year. Less demand related to the COVID-19 vaccines, but continued growth, maybe potentially at least from 2020. So please let us know if you're thinking about this the right way. And then a second question, given all this kind of conversation around payer support for Zyosted, as we think about to Lando, do you expect the standard six to nine month timeframe for broader access? Can you leverage your kind of Zyosted coverage as we think about the expected timeframe for Palando to meaningfully contribute. Thank you.

Thanks, Stacey. I'll take your first question around EpiPen. We believe TAB is going to maintain their market leading position throughout 2022. When they started at the beginning of the year of 21, their market share was lower. and they grew it over 2021 to 56% to 60%, depending on the week that it was reported. And we expect that, we're seeing it continue in 2022, and so we expect them to continue to maintain that market share. We're not expecting growth in the market share, but overall, because they have a higher market share for the duration of, we believe, in 22, that will obviously provide growth. And we believe that that will likely offset some of the upside that we saw from the COVID vaccine centers. And additionally, during the year, because we had really sold a lot more devices than we expected, or Tevis sold a lot more devices than expected, we depleted our safety stock of our devices. And so we're in the process of really trying to replenish that now, you know, as you can imagine in 2021 with the pandemic, you know, our manufacturers who make EpiPens were stressed. Like everyone else was as far as labor was concerned and so forth. And so we're now starting to see that open up again where labor consistency is there. And so we'll likely see an increase in the overall device revenues. when we sell the product to Teva. So when you look at that, we did $70 million of business last year between royalties and devices. We expect to see growth from that number, and the mix will probably be a little bit more heavier on the device side and relatively, hopefully, flat on the royalty side. We just don't know the overall impact of the pandemic is how much of the volume is related to that. additionally we do expect the back to school in the third quarter to be normal and that'll be key you know and and we saw that in 2021 with the back to school being relatively normal we saw a huge improvement in that uh market or that timing and so uh we don't expect to see anything different from uh last year than from this year in that regards do you want to cover the um

I was going to share a couple things. So a couple things I would say with regards to Talando and the question about coverage. Our anticipation is we'll get to a point where we've got coverage similar to that as I said. Obviously that's going to take a little bit of time to develop that. Initially we're thinking we'll hopefully at least have one partner hopefully on board potentially with us early on. The other thing I would say, though, that's gonna help us, regardless of that, out of the gates, is really two things. One is customer relationships. So we know these customers, we've been calling on these customers, so that's gonna be a big help for us to at least help them identify the appropriate patients for Tolando. And then secondly, I would say we really have built a team of experts across our field team with how to advise offices to go through that prioritization process to get patients on therapy. That's a real skill set that we've got in our field team that we know will help us, you know, up to the point where we do have broader, you know, payer coverage. But, Fred, anything else you wanted to add on?

No, I just echo what you said. You know, having the strong coverage that we have with SAS, that we have regular communications, our market access team has already been in communications with all of them, already putting together the kit as to what we're looking at, you know, the price we expect to go out and getting their initial feedback. With Zosted, it took up to a full year to get full coverage in place for us. We're launching in the second quarter of this year, so we certainly hope we'll come out with coverage as soon as we launch and then add additional coverage during the year. But, yeah, I think being in front of the doctors, seeing Zosted grow with the payers right now, gives us a step up as we launch to land on.

Really helpful. Thank you.

Moving to our next question, and that will come from Matt Kaplan with Ladenburg Thalman.

Hi, good morning, guys, and congrats on the fourth quarter and 2021 results. I just wanted to focus a little bit on the growth opportunities for the business with respect to future products driven, I guess, initially by your internal pipeline, 1901, 1902, 1903, and then products with, you know, partnered with Adorsia, you know, Pfizer, and Teva. I guess, can you give us a sense with respect to the internal pipeline, what each of those, the opportunities that each of those represent and give us a sense in terms of the timing, potential timing of the impact of launches for those products as well.

Hey, Matt, I'll try to take that question.

There was quite a number of things in there, and quite a number are very forward-looking. But as far as our future products, obviously the most near-term product for us is our hydrocortisone rescue pen. for adrenal crisis. Right now, we continue to expect to be, we're targeting a NDA filing by the end of this year. If we were to get a normal review cycle, that's a 10-month review. We're going to obviously look for an accelerated review, but there's no guarantee on that. We're looking at a 2023 potential approval, so everything goes extremely well. And so that would be a launch at the end of that year or beginning of 24. When we look at our assets, when we look to develop something internally, there's a threshold that we try to maintain as far as value is concerned. And with the hydrocortisone rescue pen, I've publicly stated that we believe it's at least a $100 million opportunity. And we kind of use that as our benchmark for all of our internal assets. And so it's not that we're gonna, we don't know if we're gonna definitely get to that point, or we could obviously exceed that, like we believe we're going to eventually with as I said, but it's an internal measure that we use for ROI in order to develop our assets, and that applies to 1902 and 1903, and I'm not gonna go through the timelines of those, because they're still really early stage, and we're working through not only the clinical program, but then also just the commercial assessment of those and so forth. So overall, I think we have a very good and a very strong robust pipeline, and we're going to continue to add to that. That's one of our goals internally is to always try to add one more new development candidate a year as we move forward. And we believe with our technology that we have that capability, as well as through CorpDev. That's really... success in our revenue, our success in our cash generation is really opening up our opportunities like we did with Talando, like we did with Nocturna, where two out of our three things in our current bank weren't even developed internally. So that's a huge difference for us relative to where we were just a few years ago. And so when we look at our future products for internal, I think we will continue to bring up assets in that range or bigger. In corp dev, we're obviously looking for assets in rescue therapy. We're looking for assets in orphan indications because a number of our assets are in that, and there's a high value for those. And so we believe that we'll continue to look at those type of assets that we can either finish developing or get it already commercial and launch it. But I think our opportunities are pretty broad. When you look at our partner pipeline, that's just another whole set of opportunities that we really don't talk too much about because our partners are developing those and we're helping them with the device side. But as you see with EpiPen, when they are successful, when they get across the goal line, they can be significant growth drivers for our company. And so we are committed to not only the internal programs, I mean, I'm sorry, the pipeline pipeline, the partner products that we have with our different partners, but also continue to increase those number of alliance programs. Again, we'll continue to talk to new partners, potential partners, and try to get more of these combination products, more of the rescue pens in conjunction with partners because it's a really good mix for us to have both internal development as well as the partner alliance business because the partner alliance business gives us a lot of potential future cash opportunity if they were paid during the development. And for us, it's a low-risk opportunity that could have a very high yield like the EpiPen.

Okay. Great, great. Fair enough. And then just moving back to just maybe a little bit more color on Pfizer, you said you had expected them to, you know, file for that last year, and there's still a commitment to moving forward for this year's. Are you... Do you have visibility to that filing or what's your sense at this point?

Yeah, I mean, as far as, you know, we're working with Pfizer to move that filing along. You know, it's obviously their file and so we're supporting them and we're trying to target this year to file. But again, you know, we're working on what is the strategy you know, and how, you know, how is it going to get done, and, you know, we are in constant contact with Pfizer to move that program along. And so that's all I can say. Again, you know, when we're talking about external programs, I really don't have the ability to speak about them. It's not our product. It's our partner's products. And so that's the best I can say for now. And like I said in my prepared remarks, it's still, it's a rescue pen that's still needed. There's no doubt about it. The market hasn't changed, if not, if anything, it's gotten bigger. And so, you know, we're committed to the program and, you know, we're going to, you know, continue to, you know, try to move that forward and, you know, hopefully we'll have some more guidance on that in the next couple months once we, you know, have further conversations with Pfizer instead of timing the program.

Okay, great. Thanks for the edge color and congrats again. Now moving to Greg Frazier with Truist Securities.

Good morning and thanks for taking the questions. I'm not sure if I missed this, but were there any material changes in payer coverage for Zaya Fed for 2022 relative to 2021 that will help support demand growth? You mentioned a slight decline in gross net, but does that come with better coverage? How should we think about operating expense growth in 2022, excluding the incremental spend that will be tied to the Talando launch? Thank you.

Sure, no problem, Greg.

It's hard to be laughed when you said that about the payers. I mean, I'll cover that real quick. The payer coverage is exactly the same. Obviously, every quarter, you might gain a regional plan, might lose a regional plan, but we're still right around that 75% coverage. And the reason why we laughed is, you're not getting anything additional for their additional fees that they're charging. That's the most frustrating part about the current payer environment is that a lot of the increase in the rebates, if you want to call it, aren't really rebates. They're fees to those PBMs. The rebate levels have been relatively consistent. They've just increased their fees for data, increased their fees, right? Whatever they want to call them, it's just an increase in their cost and that affects our net, our gross to net. And so coverage is the same, fees have gone up, and the rebates are relatively stable. On the OpEx, I think we can talk about that.

And Greg, I think you hit it right when you looked at the commercial side. There's two pieces there, right? We have the additional sales force coming on board for the majority of the year, and we have the launch of Tolando. We want to make sure we have a proper launch of a product. So those two items are going to contribute for the increase that we see on the SG&A side. On admin side, I'm not expecting much of a change there year over year. When it comes to our research and development, as Peter went through earlier in his presentation, we are moving the products forward with hydrocortisone, the 1902. We're targeting end of this year for an NDA. 1901, 1903 are continuing to have work done as well. So we will see an increase year over year in our R&D expenses from 21 to 22. based upon our own internal R&D projects that we've announced.

Our overall strategy for 22 is invest and grow. We want to invest in the brands that we have. We have a launch of Colando. And Nocturnal really didn't have a launch per se. It was launched during a pandemic. And so we're committing the same level of resources in year two that you typically would do in year one because of that loss of a year with the pandemic. Especially for new products, it was much more challenging to get access to doctors if they didn't know what the product was about or how it worked and things like that. So we're investing in Nocturne, and obviously we're continuing to invest in Zysta because that's in the very early stage of its life cycle. We're in year four. We're still seeing accelerated growth in that product. And, you know, so we obviously want to invest in that. And in our pipeline, it's really important for us to continue to bring these opportunities forward. And so, you know, with the increase in revenue, with the increase in cash generation and profit, you know, we're able to put some of that back into the business so that we can continue to have a really strong commercial portfolio as we continue to grow.

Got it. Thanks for all the colors.

And ladies and gentlemen, this does conclude your question and answer session. I will turn the call back over to Tram Bui for close remarks.

Thank you, everyone, for joining us today. Please feel free to reach out to me if you have any additional questions. Have a great day.

Ladies and gentlemen, this does conclude your conference for today. We do thank you for your participation, and you may now disconnect.