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spk14: Greetings, and welcome to Avidel Pharmaceutical's second quarter 2024 earnings call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. As a reminder, this conference is being recorded. It is now my pleasure to introduce Austin Murtaugh with PrecisionAQ. Thank you. You may begin.
spk16: Good morning, and thank you for joining us on our conference call to discuss Avidel's second quarter 2024 results. As a reminder, before we begin, the following presentation includes several matters that constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those contemplated in such forward-looking statements. These risks and uncertainties are described in Avidel's public filings under the Exchange Act included in the Form 10-K for the year ended December 31st, 2023, which was filed on February 29th, 2024, and subsequent SEC filings. Except as required by law, AVIDEL undertakes no obligation to update or revise any forward-looking statements contained in this presentation to reflect new information, future events, or otherwise. On the call today are Greg Divis, Chief Executive Officer, Richard Kim, Chief Commercial Officer, Dr. Jennifer Goodman, Senior Vice President of Medical and Clinical Affairs, and Tom McHugh, Chief Financial Officer. At this time, I'll turn the call over to Greg.
spk04: Thank you, Austin. Good morning, everyone, and thank you for joining us for this quarterly update. Following my opening remarks, Richard will provide an update on our launch progress. Jennifer will walk through our phase three idiopathic hypersomnia, or IH, clinical trial. Tom will then review our second quarter financial results, and we will conclude with a question and answer session. The second quarter marked the one-year anniversary of introducing Lumerize to the market, and I'm immensely proud of the work done by our team and the impact we have made within the narcolepsy community. From the start, we recognized that OxyBait-eligible patients deserved a once-at-bedtime treatment option that addressed their needs where first-generation OxyBaits fell short. Our team's relentless determination in serving people with narcolepsy has been the driving force behind our tremendous progress. Since launch last year, we have seen our pre-approval market insights materialize in real time, which when combined with the strong foundation we have built only reinforces our confidence in the significant opportunity that Loom Rights offers in our pursuit of its potential billion-dollar-plus opportunity. Specifically, we point to the following. We have seen consistent, strong uptake from patients switching from the twice-nightly, first-generation OxyBait products, the majority coming from the mixed salts formulation. Demand is growing from both naive patients and patients who have previously tried and discontinued twice-nightly OxyBaits, a patient segment many had discounted. And the launch of Lumrise has resulted in the expansion of new OxyBait prescribers who had previously never written an OxyBait script And additionally, physicians who are now treating more patients with OxyBase, specifically with Lumerize, than prior to our launch, resulting in new patients coming into the OxyBase market that prior to Lumerize were not accessible or potentially interested. These important data points only confirm what our research informed us, that the OxyBase market opportunity for Lumerize is both significantly larger than that of the first-generation OxyBase and is unique primarily to Lumerize alone. With that, we are pleased to report that there were more than 1,900 patients on therapy at June 30th, and we generated $41.5 million in net revenue during the second quarter of 2024. Additionally, as Tom will cover during his review, based upon how we exited Q2, we currently expect that we will generate operating income in Q3, an important financial milestone we will have achieved during the first full calendar year of launch. As announced last week, we dosed our first patient in our phase three revitalized trial, evaluating Lumerize's potential benefit in the adult IH population. Based on feedback from physicians and experts in the field, we believe Lumerize has strong potential to improve care for those living with IH through its unique extended release formulations. In addition, we are expecting a potential approval decision by the FDA for our supplemental new drug application for Lumerize's use in the pediatric narcolepsy population. The target action date is set for September 7th. If approved, we believe Lumerize has the potential to address the needs of both pediatric narcolepsy patients who could benefit from a full therapeutic dose of inoxibate given in a once-at-bedtime formulation and the caregivers who currently have to awaken in the middle of the night, night after night, to administer a second dose of a first-generation Oxibate to their children. Lastly, we continue our development work on a potential no or low sodium once-at-bedtime Oxibate formulation with a target profile that is bioequivalent to Lumerys. As previously stated, we expect to have an update by the end of 2024. In summary, after one year of launch and with an eye on the future, we believe LumeRise is well-positioned in its pursuit to become the preferred oxibate among patients and providers as we continue to positively impact the multibillion-dollar oxibate market opportunity. I'll now turn the call over to Richard for details on our commercial developments. Richard.
spk02: Thank you, and good morning, everyone. As Greg mentioned, it's hard to believe that we have one year of launch behind us. And what a year it's been. It has been amazing to witness Bloomerize's transformative impact among people with narcolepsy, their families, and healthcare providers. Let me start with our new key patient metrics. As of the end of Q2, there were more than 1,900 patients on therapy. Additionally, for our leading indicators that we have provided quarterly since launch through June 30th, Approximately 3,800 patients were enrolled in our Rise Up patient support program, and more than 2,400 total patients had initiated therapy. With our second quarter numbers, you can see that we have continued the momentum with our launch and that there has been no slowdown in quarter-over-quarter patient demand for Lumerize. Now, looking at our patient dynamics, we continue to have strong representation across our three patient segments. including those switching from or previously discontinued twice-nightly oxibates and those new to oxibates. As expected at this stage, switched patients still make up a significant portion of patients on lumerize. At the same time, it's been especially encouraging to see more new to oxibate patients being prescribed lumerize. Now, this, in addition to Lumerize, is used in previously discontinued twice-nightly oxibate patients, along with new writers for Lumerize who have previously never prescribed an oxibate. Our important data points validating our market research that Lumerize can grow the oxibate market beyond its size from when it was just first-generation oxibates. Now, our data continues to indicate there are more than 4,500 ACPs who make up the current oxibate prescribing universe. Importantly, from these HTPs, almost 500 make up 50% of the total OxyBase prescription volume. And to date, 85% of that group have written for Lumarife. We are pleased with our continued capture of high-volume OxyBase prescribers, as they represent a core component of our launch strategy. Transitioning to product fulfillment, our overall pull-through process continues to deliver, with over 700 new patient starts in the second quarter. These results are attributable to a number of factors, including robust payer coverage, strong execution for our field reimbursement and rise-up teams, along with HCPs continuing to gain clinical experience prescribing Lumerize. Looking to the second half of the year, we have built a strong foundation we believe will support Lumerize's ongoing uptake in the Narcissus community. In particular, demand for Lumerize continues to be strong. And our fulfillment systems are working to get patients initiated efficiently. Paired with early signs that the oxibate market is growing, we remain highly confident in our belief that Lumerize is on track to become the preferred oxibate in the narcolepsy market. And now, I will turn the call over to Jen to discuss the recent dosing of the first patient in our Phase III IH study.
spk07: Thank you, Richard. Since the introduction of Lumerize, we have heard from patients and providers repeatedly about the transformative relief Lumerize has brought to their lives. Lumerize has not only provided patients with the opportunity for an uninterrupted night's sleep, but we also often hear about what they characterize as a restored ability to live their lives on their own terms. While we have been serving the narcolepsy community for more than a year with Lumerize, People living with IH have been severely constrained in a lack of approved treatment. In April, an externally led patient-focused drug development meeting was held with the FDA and sleep consortium to inform patient needs for IH treatment. Among more than 800 individuals living with IH, nearly two-thirds of respondents stated that their IH symptoms were not controlled or were poorly controlled. Patient testimonials underscored the need for additional therapeutics. Physicians and patients have been vocal in their demand to see Lumerize evaluated for IH due to the deep sleep inertia associated with IH, and we are now answering their call. We are excited to have recently dosed the first patient in our clinical trial evaluating Lumerize for IH as it is the first step to potentially bringing this important therapy to patients. Our study, known as Revitalize, is a double-blind, placebo-controlled, randomized withdrawal, multi-center phase 3 study to evaluate the efficacy and safety of Lumerize as a once-nightly dose in IH patients. Enrollment of approximately 150 participants will include both those switching from first-generation immediate-release OxyBase as well as those not on OxyBase therapy at baseline. Our primary efficacy endpoint is to demonstrate a change in the upward sweepiness scale score, which is administered at week 14 after a two-week double-blind randomized withdrawal period. Our key secondary endpoints are the patient global impression of change and the idiopathic hypersomnia severity scale, which is a validated multi-domain assessment of key IH symptoms. The primary efficacy analysis will occur after the 14-week portion of Revitalize is completed, and the study will be followed by an open-label extension. Initiating Revitalize is a key milestone for Avidel, and most importantly, for the IH patient and medical community. We have seen the positive impact that Lumerise has had on narcolepsy and are working diligently toward expansion in IH. I'll turn the call over to Tom for a review of our financial results.
spk04: Thank you, Jen. Before I begin, please note that full financial results are available in the press release issued this morning and the 10Q. I will also be reviewing non-GAAP financial results, which can be found on our investor relations website at investors.avidal.com. I'll start with our top line results. In the quarter ended June 30th of 2024, We reported net revenue of $41.5 million and gross profit of $38.7 million, both of which represent a greater than 50% increase from the quarter ended March 31, 2024. The increase in net revenue was driven primarily by continued strong patient demand for Lumerize. Additionally, we estimate that there was about four weeks of inventory in the channel at the end of June versus approximately three weeks at March 31st. Turning to operating expenses, we reported $51.5 million of GAAP operating expenses for the second quarter, which includes a non-recurring expense of $5 million related to the previously announced mandatory exchange of the company's American depository shares and termination of the American Depository Receipt Program. As a result of the mandatory exchange, Avidilla was added to the Russell 3000 Index at the beginning of July. The second quarter also included $6.5 million of non-cash charges comprised of stock-based compensation of $5.5 million and depreciation and amortization of $1 million. After adjusting for these items, which total $11.5 million, remaining cash operating expenses were approximately $40 million. We expect that for the remainder of 2024, recurring quarterly cash operating expenses will be in the range of $40 to $45 million, and non-cash operating expenses will be in the range of $5 to $7 million. With respect to the balance sheet, we have $71.4 million of cash, cash equivalents, and marketable securities as of June 30th. The use of cash during the second quarter included the $5 million of expense related to the termination of the American Depository Receipt Program. I'll finish my remarks with a few comments regarding our expectations for the remainder of 2024. We continue to pay close attention to the sell-side estimates, and at this time, we are comfortable with the current revenue consensus of approximately $168 million for the full year, including the possibility that it could be higher if actual results, such as the rate of increase in reimbursed patients, the total number of reimbursed patients who are treated with Lumerize, and net pricing outperform the assumptions currently used by the sell-side analysts. Lastly, with respect to our timeline to reaching break-even, we were very close to achieving this during the second quarter when comparing $38.7 million of gross profit to approximately $40 million of recurring cash operating expenses, which resulted in an adjusted operating loss of approximately $1.2 million. Based on our current plans and assumptions, we expect that adjusted operating income will be positive beginning in the third quarter and continue to be positive for the remainder of 2024. Our expectations regarding adjusted operating income are based on a number of factors, including the number of reimbursed patients on Lumerize, net pricing of Lumerize, and recurring cash operating expenses. And with that, I will turn the call back to Greg for closing remarks. Thank you, Tom. Before we wrap up, I want to take a moment to comment on our publicly reported launch metrics and what to expect moving forward. This quarter, we added a new metric, the total number of patients on therapy. With a full year of launch now behind us, going forward, we intend to report only this patient metric and, of course, revenue, as we believe these two metrics are the most important as our launch matures. We believe we are well-positioned to execute our business priorities, including our ongoing launch of Lumerize and our lifecycle management opportunities. both of which are focused on our primary business objective, maximizing the full value of Lumer. So in conclusion, we're very pleased with our progress and our growth thus far, recognizing that we have much more to accomplish. We thank you for your support and look forward to providing future updates on our progress. And with that, we will open the call for questions. Operator?
spk14: Thank you. At this time, we will conduct the question and answer session. As a reminder, to ask a question, you will need to press star 1 1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1 1 again. Please stand by. We will compile the Q&A roster. Our first question comes from the line of Andrew Sy of Jefferies. Your line is now open.
spk09: Hey, good morning. Congrats on the strong launch and appreciate you sharing the metrics. Thanks for taking our questions. So the first one is, if we were to take another look, data cut as of July or even early August, how does the slope of uptake look so far? Should we be factoring in some kind of summer seasonality due to holiday vacations this quarter, or should we expect slope of patient additions and so forth to remain unchanged or even increase this quarter? Thanks.
spk04: Thanks, Andrew. I think we would qualitatively characterize it as, you know, our trends remain consistent as we've seen to date. This is our first summer that we've been in the marketplace. So, you know, whether there's seasonality or not, we'll have a chance to assess that for LumeRise specifically as we get through the period. But at this point, I think we would describe it as continuing to be consistent as to what we've seen.
spk09: Great. And then secondly, speaking of just the slope being consistent, You know, pediatric could be approved in a month from now. So that's 5% of the current Oxfate users. So is it fair to assume there could be a nice little bolus coming from that approval? Or could the uptake in this population be slower than what we're thinking?
spk04: Yeah, I think as we think about it, it's an important addition to our label because we hear quite a lot from parents who wake up in the middle of the night, night after night. Again, it's a relatively small patient population. So I think over time we have an opportunity to both convert patients. as well as potentially even expand the use in the pediatric market over time based upon some of our insights. I think if we think about the balance of 2024, it's modestly or marginally incremental at this point, but, you know, longer term, we think it's really important.
spk09: Great. Thank you so much.
spk14: Thank you. Our next question comes from the line of Francois Brisebois of Oppenheimer. Your line is now open.
spk03: Hi, thanks for taking the questions. I was just wondering, in terms of reimbursement, where we stand now, and just the impact there of if you kind of cut it as revenue per patient, and obviously appreciate the new metric and the look back at that new metric and what it meant, but if we're thinking about revenue per patient, is there any impact expected from reimbursement here in the second half?
spk04: Maybe, Richard, you can cover reimbursement, and Tom, kind of value per patient.
spk02: Yeah, hey, Frank, thanks for the question. Yeah, we're super pleased with how our market access team has performed. To date, we have about 85% of commercially covered lives where a boomerang policy exists, so it's been really strong, which has really helped to drive us being able to get patients initiated. So, Tom, you want to sort of take the revenue per patient?
spk04: Yeah, so thanks, Frank. The revenue per patient Last quarter, we had talked about exiting the quarter at about $120,000 per reimbursed patient. We've seen some improvement in that, that net pricing heading into Q2. I'd say it's natural to some extent because Q1 is pretty heavily impacted by gross net adjustments. So we do see some improvement in Q2. I think the only other comment I would add regarding reimbursement is that the other segment of our business, which represents you know, 15 to 20% of enrollments are really non-commercial, predominantly Medicare and Medicaid. And as we get into 2025, where a lot of those decisions will be made for Lumerize, which we weren't eligible in 2024, especially for Medicare, we'll get a better sense of how our coverage evolves beyond the commercial coverage, you know, as we roll closer to the end of this calendar year.
spk03: Thank you. And then maybe just lastly in – In terms of new prescribers to OxyBait that weren't prescribers before the 4,000 or greater than 4,500, I know it's concentrated, but did you guys approach these docs? Is this surprising that these docs who never prescribed OxyBaits for over 20 years, you know, have started based on the once nightly? Is it just more awareness? Where do these docs come from?
spk02: Richard? Hey, Frank. For the vast majority of those providers, we have not called on them. So I think this really speaks to the really tremendous value proposition that Lumerize brings. And in our prelaunch market research, when we tested our profile with high-use narcopsy prescribers who don't use OxyBase, half of them said with the profile of Lumerize, they would want to prescribe Lumerize compared to what they haven't done with the first-generation OxyBase. So we think it's a really positive sign and something for us to build upon going forward.
spk04: Yeah, I'll just add to Richard's comments is that, you know, it's really interesting to us that we're getting demand without any really true effort on our part directly in terms of promotion. So it's something we're evaluating to see if there's some more we can do there for sure.
spk13: Great. Thank you, and congrats again. Thank you.
spk14: Our next question comes from the line of Ami Fadia of Needham & Company. Your line is now open.
spk05: Hi, good morning. Thanks for taking my question. Can you give us a sense of what percent of patients that are currently on Lomerize either came from one of the other oxibates versus previously discontinued as well as never on oxibate before? And then if you could give us any updates on pull through at the peer level across the three GPOs that you have contracts with. Perhaps any color on Humana or some of the other opt-in plans would be helpful. Thank you.
spk02: Thanks for the question, Tommy. So as far as sort of like a percentage of switch versus sort of never on anoxibase before, the biggest chunk of our patients that we have right now are still being sourced from switch patients from first-generation proxibase. with the highest percentage of those being from the mixed-up overall as well. So what we are seeing at the same time, though, is that the new-to-oxidated patients are starting to increase their representation as well. And we really see that as a very positive sign where they sort of continue to support the value proposition of Luma. So the biggest chunk are still switched patients, but we are starting to see a bit of an increase in the representation of new patients prior to the oxidase. And as far as the GPO representation is concerned, I think, you know, traditionally what we sort of see is the Zinc CBS lives are and the Cent lives are the biggest chunk with Optum being smaller. And I think what we're seeing in general is the channels being representative of the size of those GPO contracts with the Zinc being the largest, Cent being the second largest, and then the MSR Optum business being the smallest of the three. So pretty consistent with the sizing opportunity of those three contracts that we have.
spk04: Yeah, I think the only other comment I would add to that is that I think it's fair to say that the significant majority of the lives underneath those GPO umbrellas have established policy coverage decisions now, not all of them, with regards to LUMA. So I think getting to your question, we've got policy coverage decisions in place and pulled through those through the GPO context.
spk05: Okay, great. If I may ask one more question, can you just sort of walk us through or give us an update on the cadence of when you expect decisions from the ongoing IP cases, and specifically on the Jazz versus FDA case, can you walk us through the upside-downside and how we should think about, in a downside scenario, the ability to keep Lumerize on the market should a decision go in favor of Jazz? Thank you.
spk04: Well, in terms of timing, I think it's our view that the next decision will likely come out of the APA case in D.C., followed by the patent case in Delaware. You know, so when that is, you know, we don't know. And they could come in a different order, I guess. That's ultimately at the discretion of the judge from that perspective. And we, again, our position hasn't changed. We're very confident in our views. And even if the decision were unexpectedly go against us in that regard, we're prepared to take whatever steps necessary to ensure that Lumerife stays on the market to be able to treat patients accordingly. And we believe that will be the case. But I'll close out again on the litigation matters that we're highly confident in our position. And I'll remind all of our investors that You know, there's other cases that are coming after this as well, including our antitrust case, which has been set for November of the next year, for which we're pursuing requisite damages for the unnecessary delay of Lumerize's approval due to the inappropriate listed REMS tax. But in terms of timing, it's really at the discretion of the judge, and we're prepared to act accordingly.
spk13: Thank you. Thanks, Tom. Thank you.
spk14: Our next question comes from the line of David M. Sellem of Piper Sandler. Your line is now open.
spk10: Hey, thanks. Just a couple for me. I know you're going to have more updates on the low sodium product, but can you talk to generally the IP situation on that formulation and your level of confidence that you're not going to run afoul of Jazz's intellectual property surrounding their low sodium oxidate product. So that's number one. Then number two is, is it fair to say that with a bioequivalence pathway for that, that there's a relatively rapid path to market for that formulation? And then lastly on IH, are you thinking about that opportunity as something where you can expand the market Or do you see switching away from ZyWave to Lumerize in the IH setting, or is it a little bit of both?
spk04: Thanks. Thanks, David. I'll try to pick those off one at a time. Again, I think when it comes to our development strategy and our approach to a low or no sodium formulation, we have to understand what's in the patent landscape. For sure. And so we would be pursuing that. You should assume that we're pursuing our direction accordingly with that being considered, you know, appropriately in our development plan. If it was as simple as just formulating something, you know, similar to what's in the market today, it would have already been done by now from that standpoint. So, again, we're very conscious of what the patent landscape is out there and navigating it appropriately. Number two, on your question about the development pathway using a bioequivalence, that ultimately is a decision by the FDA to agree with us on that approach, but we do believe that there is a pathway based upon other products that have been approved that a bioequivalent-only pathway is a viable pathway, assuming we can demonstrate bioequivalence, and the FDA agrees with that. And lastly, in terms of IH, I think right now, you know, you've heard Jen talk about the research and the symposium that the FDA held specifically where 800 patients talked about you know, the need for more therapeutic options. Their symptoms are not controlled with the current available treatments. So, you know, from our perspective, just the narcolepsy, patients may choose, due to the nature of this condition, to want to switch to Lumerize. Should it be approved? Our view is we think it's important to add another treatment option. We think the nature of this condition is such that a once-at-bedtime option in the form of Lumerize is very, very compelling. to patients, and we hear that all the time, in particular from physicians and key opinion leaders who will, you know, as Jen, I think, noted, are very, very bullish on the prospects of what Moonrise could offer for their patients, primarily because these patients struggle with the ability to wake up full stop, right, to take their second dose. So, again, for us, it's an option for all patients, whether they're on therapy today, and what we know today is that there's You know, depending upon what data set you look at, there's anywhere from 30,000 to 40,000 patients with a unique, you know, diagnosis code related to idiopathic hypersomnia, and a small percentage of those are actually being treated with the only FDA-approved drug today. We think Lumerize offers a really great option for them as well.
spk13: So, thank you. All right. Thank you.
spk14: Our next question comes from the line of Mark Goodman of Larrink. Your line is now open.
spk12: Tom, I know we talked about, you know, kind of the question a little bit already, but can you give us a sense of free goods, just how much, you know, what percent of free goods, both the second quarter, maybe just the direction you're moving in there and the impact it's, and just more broadly on the market, What's your sense of the total number of patients? Like, you know, how much did it grow versus, you know, before you launched? Thanks.
spk04: Yeah, Mark, you're a little bit breaking up. So I just want to make sure. The first question is, I believe the patients who are on free product, right, relative to the total. Yes. And then the second is just how we're doing the market, the market trend.
spk12: How much of the market's changed exactly, you know, before you launched and now? Yeah, I know.
spk02: Thanks for the questions, Mark. You know, for us, where we are with Luminize in the launch right now, we think the single most important thing that can happen is HCPs and patients get experience with Luminize. And the feedback thus far has been terrific. And we really see free products as an investment in our launch overall. Now, what we hear from other specialty sort of chronic product launches is sort of free products being used in about that 20 to 25% range of total patient usage. We think that's a pretty good proxy when you think about things. And for our business, over 80% of our business is commercial today. I think Greg had commented that part of our business, we would anticipate getting more of our CMS, especially Medicare patients being picked up in 2025. So we do believe that things will improve for us. But once again, it really comes down to us doing free products as an investment and gaining HCP and patient experience. And ultimately, we are also able to convert some of these patients using our programs, either our bridging program or our temporary assistance program, our permanent affordability program, onto reimbursed patients as well. And as far as the overall market size is concerned, we've had, with our claims data provider, it's been a little bit messy in the second quarter. First, overall, what we see overall in the marketplace, Mark, is a few good leading indicators for why we believe the market is growing for OxyBase. The first is the previously discontinued patients to poison the OxyBase, we believe are uniquely a lumerized opportunity, and we're getting a good portion of those starting and initiating therapy with lumerized. The second is we are getting more new to naive patients initially in lumerize. That's consistent with the market research that we've heard prior to launch that lumerize would open the doors for more new to oxibate patients considering going back to an oxibate. The third thing that we talked about earlier was that we are getting unique prescribers who have never prescribed a first-generation oxibate that are now prescribing lumerize as well. So we view these as all early positive signs that the market is growing beyond where the first-generation oxibate market was.
spk04: Yeah, I just want to emphasize a couple points Richard made. Again, I'll just restate it. Number one is that is that we don't think lumerize is going to dramatically be different in terms of its percentage of free drug versus kind of other products but what we've seen which i think is a really positive is we've seen patients when a coverage policy decision comes into play as richard noted we've been able to convert them to a in essence a paying patient so that's something that our team is focused on and we'll continue to do that and and again i think the way i think about the notion of what's happening with the market because kind of the secondary data sources are a little choppy right now, is that patients that were getting added to Lumerize, sources of business were getting added to Lumerize as new starts, they're not in the denominator of kind of the legacy market, right? Those patients weren't there before. So from our perspective, that is a great sign in terms of what are the prospects, you know, one year into launch of what the potential future holds for our ability to really grow this market. Thanks.
spk13: Thanks, Mark. Thank you.
spk14: Our next question comes from the line of Ashwani Verma of UBS. Your line is now open.
spk06: Hi, good morning. It's Fatima on behalf of Ash Verma at UBS. Thanks for taking our question. Just like very quickly, can you talk about what you are seeing in terms of discontinuation persistence rates? Any change from what we've seen early in the launch? And just a quick second question, are you seeing any impact in the second quarter from Zirin being removed from certain formularies? Thank you.
spk02: Thank you very much. Richard? Yeah, no, thanks for the question. So, as far as it comes to discontinuations, what we see holistically is Lumirise has lower discontinuation rates than the first-generation OxyBase when we compare that at time-matched cohorts of patients throughout the launch. What we do know historically is discontinuation rates for oxidase tend to be higher earlier in treatment, and they tend to subside over time. And that's also what we see with lumerize, once again, lower than first-generation oxidase. And the discontinuation rate is probably driven a little bit more from naive patients and previously discontinued patients that do have a higher discontinuation rate than the switch patients do over time. But we've also learned a lot like we have in other components of our launch. We're learning a lot from ACPs and patients. We're learning how to intervene differently, when to intervene, how to intervene, how to specialize things depending on which patient type. So we know that every product does have dropouts, and that's true of any chronic medication. But we work really hard to get these patients started, and we are going to be working really hard to make sure that the right patients stay on therapy as well. And as far as your second question about the impact from Xyrem, Yeah, I mean, clearly there were some changes in some formulas that happened earlier this year. We did benefit from some of those patients going on to LumeRise. But we also know that our value proposition is very strong against all first-generation toys on the osteobates. So those switch patients, as we mentioned before, remain an important source of our business, in addition to the other two segments as well as we go forward.
spk13: Great. Thank you. Thank you.
spk14: Our next question comes from the line of Oren Livnat of HC Wainwright. Your line is now open.
spk11: Thanks. I appreciate it. Clearly, you have plenty of room to grow in narcolepsy, but you're pretty aggressively pushing into IH. I have a couple questions there. First, what's the reasoning behind trying to get in there right away now while that market is maybe not as developed. Is there any reason to maybe let your competitor with Twice Nightly continue to make the investments and do the legwork, probably the tougher lifting to grow that market first and get OxyBait established as a therapy versus getting in there ASAP? And also, do you believe you have, you know, IP aside, freedom to operate there given the I think there's some different labeling on the ZyWave side and some of the arguments your competitors making on that front in court and I have a follow up thing.
spk04: You know, whatever the competitor is doing, they're doing right from that perspective. But it's clear to us in our feedback from physicians and patients that there is an unequivocal need for Lumerides in this category, in this patient population, and we're not going to wait for someone else to do whatever they're going to do to serve this community and help expand and build our franchise. And regardless of what's in their label or what arguments they make or don't make, it doesn't matter to us because we believe we're going to introduce Lumerize to this patient population. It will be well received. It will serve and have its rightful place and has the opportunity to make a difference and arguably to the market leader in this category as well. So we believe we have full rights to operate accordingly. And at the end of the day, the market has spoken to us in the form of patients and physicians who said, get us Moonrise as fast as you can. That's what we're trying to do.
spk11: Okay. And it's really impressive that you guys are projecting adjusted break-even next quarter. And I think OpEx is actually lower than I had modeled, excluding that item this quarter. Can you just talk about you know, you're growing revenue really rapidly, OpEx not so much or at all now. How does that look going forward? You know, are you right-sized for continued dramatic growth from here, you know, IHS side, or do you think you need to invest more behind this product along with revenues? And also, I'm curious about cash conversion going forward, too. Obviously, you know, it's not surprising accounts receivable are accumulating as this product grows rapidly, but do you expect that to reverse in the second half?
spk04: I'll save the second question for Tom. In terms of your comment about do we need to invest more on the launch, here's how we would describe it. Again, we're constantly evaluating our source of business and where opportunities are to try to accelerate the launch of Lumerize. I would say that we are generally well deployed and well resourced to maximize the primary opportunity in Lumerize, but we are not the least bit shy of of deploying more capital or investing in opportunities if we believe it has an opportunity to really grow both the speed and the peak of what Lumerize can achieve from that standpoint. So it's something we're always looking at. We'll point to the comment that we made earlier today that we're seeing patients go on Lumerize from physicians who we are not actively calling on. So, you know, we've been trying to understand that and what are the profile of those physicians. And is there an opportunity to, you know, to pursue that more aggressively and accelerate that segment? We believe, we've always believed longer term that was going to be something we were going to pursue over time, but it has moved faster than maybe than what we had assumed, which we think is positive. And it's something we're looking at. So I think at the end of the day, it doesn't change our outlook in terms of, you know, our view on profitability and generating operating income in the second half of this year and going forward. But it does, it is something we're always looking at because at the end of the day, maximizing loomerize is our primary objective. Yeah, Oren, you know, thanks for the question. Listen, we believe we're going to hit cash flow breakeven this year. You picked up on a key point, and it's not surprising that as we grow, our working capital will increase primarily in the form of accounts receivable. But what you see sitting on the balance sheet at June 30th will convert to cash in Q3.
spk11: Perfect. Thanks. I appreciate it. We'll follow up. Thank you.
spk14: Thank you. Our next question comes from the line of Miriam Belgitti of LifeStyle Capital. Your line is now open.
spk00: Thank you, and congrats on the quarter in launch progress. Just a quick question for me. For the Phase III IH study, How should we be thinking about success here? And how do you think Lumerizer's performance will compare to that as shared from the RD approved product?
spk04: Well, again, I'll make some comments, and Jen, feel free to weigh in. I think at the end of the day, we have an excellent proxy in terms of narcolepsy, in terms of how Lumerize performed in our clinical trial relative to the first-generation oxidase. We believe that gives us high confidence that Lumerize will be successful in our IH trial that we've initiated. So we're highly confident that we'll demonstrate highly statistically significant benefit to patients. And from that standpoint, we remain highly confident. Anything you want to add to that?
spk07: The only thing I will add is that the enthusiasm from the investigators who are participating in this trial certainly underscores everything that Greg has said. There is a long overdue unmet need to be able to provide an extended release form of sodium oxibate for IH, which only Lumerize will provide if it's approved.
spk00: Got it. Thank you for taking my question.
spk13: Thanks, Mir. Thank you.
spk14: Our next question comes from the line of Matt Kaplan of Leidenberg-Tholman. Your line is now open.
spk08: Hey, good morning, guys, and congrats on the strong core results. Just to stay on the IH theme a little bit, can you talk about, maybe it's a little bit early since you just started the trial, but the timeline for the phase three and then also the regulatory pathway Do you think you'll need two studies, or will one be sufficient for an NDA trial?
spk04: I'll take the first part of that, and Jen, feel free to weigh in on the second point. Matt, I think you made a good point, which is that it's early in the trial. We're just getting our sites initiated, our early sites initiated. We haven't reached our, let's go, our full run rate or study stage. We're very pleased with the fact that in a very short order, From a site initiation, we've seen patients move into pre-screening and the patients go on therapy. go on treatment. So by the early data points, we're excited about that, but we haven't reached our, if you will, it's going to take a while before we're at our full capacity. So I think it's difficult to project how long we think it's going to take. We've always said that we believe the best proxy right now is kind of how long it's taken the other products, the other OxyVac products to get through their phase three. And that was, let's just call it 15 to 18 months. We think that's the right proxy for us now. And to be clear, our assessment, our assumptions around that changes. We'll be sure to communicate accordingly as and when we're up and running more at kind of full steam and steady state. So in terms of regulatory pathway, Jen?
spk07: Sure, happy to comment to that. We're very pleased with the engagement that we've had with the FDA. This will be a supplemental new drug application. And of course, there's a prior precedent where there was only one pivotal trial to achieve approval in idiopathic hypersomnia. So we very much believe that's our pathway as well.
spk08: Great. Great. Thanks. Thanks for the added detail. Thanks, Matt.
spk14: Thank you. As a reminder, to ask a question, you'll need to press star 1-1. Our next question comes from the line of Brandon Foulkes of Rodman and Renshaw. Your line is now open.
spk15: Hi. Thanks for taking my questions, and congratulations on a very good quarter. Maybe just two follow-ups from earlier questions for me. Coming back to the pediatric population, how does the educational awareness compare in this population to get a patient or I guess a caregiver to switch and convince them to move a pediatric patient or for therapy that may not be as good as Lumerise but in their minds may be adequate perhaps compared to what they've tried in the past? And then similarly, You know, just given the weight-based dosing there, how much of a focus will the pediatric population be for the sales force, given the runway in the adult population?
spk04: Thanks, Brian. Richard, do you want to comment on the pediatric opportunity? Yeah.
spk02: You know, as Greg said earlier, the opportunity is about 5% of the overall occupant marketplace today. For us right now, when we think about Salesforce coverage, the vast majority of the pediatric patients are seen by physicians that we call on that treat both adult and pediatric patients today. So, incrementally, we're only adding a few physicians who are specifically focused on pediatric sleep disorders. So, I think our label will be very clear about the ability to switch patients as it is for adults today as well. And, you know, we've just heard consistent feedback from providers and families about how this could really be a changer for their families. Because remember, it's not only the patient who has to wake up, it's generally the entire family that's disrupted during the middle of the night. So it's a modest opportunity as far as numbers or percentages are concerned, but we think it's a very important opportunity for us to sort of execute against going forward as well. So we're super excited about the opportunity that lays ahead.
spk04: Yeah, I think the only thing I would add is that I don't think today we think the market for pediatric patients is going to perform any different than how we see adults today. And that, you know, physicians see patients in the ordinary course when they come in for their follow-up, whether it's three times a year, twice a year, whatever it may be, that the opportunity to discuss lumerize will come up. And, of course, it's imperative for us, which we'll be doing, is doing our related, you know, investment in marketing and awareness campaigns to the pediatric population to try to spur patient activation accordingly from a parent's perspective. But, you know, again, that's no different than, I think, how we see the adult population today.
spk15: Great. Thanks. And then maybe just... follow-up on the discontinuation rate and if I look at the metrics you gave and thanks for the additional metrics it looks like we had an additional 700 patients initiate therapy during the quarter and an additional 500 patients on therapy at the end of the quarter yeah is that a fair way to kind of think about obviously there's a lot of moving pieces around that but just at a higher level Do you think that at this stage, for every 700 patients starting therapy, 500 will stay on Lumerize?
spk02: Richard? Yeah, thanks, Brian. You know, right now, we're still relatively early on in launch. And as we know historically, more of these situations tend to happen earlier or after a patient initiation. So we haven't really sort of got our full base of sort of steady-state, longer-term usage. So we think discontinuations earlier in launch may be higher represented than they are going to be later on in launch. So I don't think we've quite gotten to our city-state. So it's a bit dynamic right now. And, you know, it's hard to sort of say exactly what's happened in the past will reflect the rates going forward. We know that there will be more discontinuation rates over time, but the rates may be different going forward.
spk15: Thanks. Very helpful. And the last one, if I may, just on IH. You know, Zywave does have the potential to dose once nightly. Do you believe Lymrise will take market share from both the twice nightly patients and once nightly IH patients? And if so, do you have any sense of what percentage of patients, IH patients, are currently making use of that once nightly dosing on Zywave? And that's it from me. Thank you.
spk02: Thanks, Richard. Yeah, no, what we know right now from the ZyWave label is 23% of patients did take a single dose. Keep in mind, those are patients from the beginning of the study who were unable to take the two doses that the study started off with. And also keep in mind that the maximum dose of those patients is six grams that they can take. We know that oxybate use for adults tends to migrate more towards seven and a half, nine grams of total usage. So it's really one of the predominant things that we hear about our opportunity in IH is that a lot of patients are incapable of waking up to take that second dose. And we believe that the opportunity for Lumerize is quite substantial from both those patients who are taking two doses and those patients who may be taking a single dose to potentially have a higher therapeutic option in Lumerize as well. So we really sort of see the opportunity within the existing Oxford patients today.
spk13: And it's great to mention before to grow beyond that as well.
spk15: Great. Thank you very much, and congratulations on the strong execution again.
spk01: Thanks, Brent.
spk14: Thank you. I am showing no further questions at this time. I would now like to turn it back to Greg Davis for closing comments.
spk04: Thank you, and thank you, everyone, for your time and joining us today on our second quarter 2024 earnings call. We wish you all a great day and look forward to providing updates in the future.
spk14: This does conclude the program. You may now disconnect.
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