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spk02: Good morning, and thank you for standing by. Welcome to the Horizon Therapeutics PLC second quarter 2021 earnings conference call. As a reminder, today's conference call is being recorded. I would now like to introduce Ms. Tina Ventura, Senior Vice President of Investor Relations.
spk08: Thank you, Justin. Good morning, everyone, and thank you for joining us. On the call with me today are Tim Walbert, Chairman, President, and Chief Executive Officer, Paul Holscher, Executive Vice President, Chief Financial Officer, Liz Thompson, Executive Vice President, Research and Development, and Andy Pasternak, Executive Vice President, Chief Strategy Officer. Tim will provide a review of the business, including our second quarter performance. Liz will then provide a review of our R&D programs, followed by Paul, who will discuss our financial performance and guidance in more detail. After closing remarks from Tim, we'll take your questions. As a reminder, during today's call, we'll be making certain forward-looking statements, including statements about financial projections, development activities, our business strategy, and the expected timing and impact of future events. Our actual results could differ materially due to a number of factors, including the risk factors and other information outlined in our latest forms 10-K, 10-Q, and any 8-Ks case files with the Securities and Exchange Commission, and our earnings press release, which we issued this morning. Your caution not to place undue reliance on these forward-looking statements, and Horizon disclaims any obligation to update such statements. In addition, on today's conference call, non-GAAP financial measures will be used. These non-GAAP financial measures are reconciled with the comparable GAAP financial measures in our earnings press release and other filings from today that are available on our investor website at www.horizontherapeutics.com. I will now turn the call over to Tim.
spk00: Thank you, Tina, and good morning, everyone. We delivered fantastic results this quarter with strong performance across the business, which sets us up for continued momentum in the second half of the year. The Tepeza relaunch has outperformed our expectations driven by rapid patient starts, strong new patient demand, and increasing prescriber base. Cristexa generated year-over-year growth of 73%, driven by continued acceleration in the use of Cristexa plus immunomodulation, which is now at more than 40%, with growth driven by both rheumatologists and nephrologists. Revicti and Prasizmi each delivered strong double-digit growth as well. In total, our net sales increased 80%, and adjusted EBITDA increased 92%. Underscoring our position as one of the fastest-growing biotech companies. As a result of our performance, we have significantly increased our guidance for full-year to peasant net sales, full-year total company net sales, and full-year adjusted EBITDA. Full-year to peasant net sales guidance is now more than $1.55 billion, representing more than 89% growth year-over-year. Our increased full-year net sales and adjusted EBITDA guidance ranges from represent strong year-over-year growth at the midpoints of 40% and 28%, respectively. I'll now discuss key second quarter and recent achievements. We continue to significantly expand our portfolio and pipeline, adding a new early-stage next-generation gout program through our collaboration with Arrowhead, as well as we initiated three new clinical trials. We continue to support our on-market medicines with many new data presentations and publications. This includes two new publications in June by independent physicians on the successful use of TPEZA in patients with chronic thyroid eye disease, or TED. There are now six publications with a total of more than 50 chronic TED patients in multiple case reports. In addition, we presented new data highlighting the efficacy, safety, and differentiated benefits of Aplizna. We awarded four new Best Workplace recognitions, with the number of awards for the year now at seven. This is continued evidence that our performance and employee-focused culture is a key factor in our industry-leading growth. We acquired the new Biologic Drug Product Manufacturing Facility in Waterford, Ireland. This is key to supporting the continued growth of Tepeza, Cristexa, and Aplizna, as well as our development stage biologics, and represents an important step in our evolution as a leading biotech company. We continued our global expansion as we advanced launch preparations in support of potential approval for Aplizna in Europe and progress with clinical trial preparation for Tepeza in Japan. We also announced we'll be hosting a virtual R&D day for investors and analysts on September 29th to discuss our pipeline and new programs planned. It was significantly expanded this year with the acquisition of the Yellow Bio in March. Looking at second quarter results, Tepeza's second quarter net sales were $453 million, with impressive year-over-year growth of 173%. The strong performance of the Tepeza relaunch was the result of excellent execution by the Tepeza team to resume treating patients impacted by the government-mandated first quarter supply disruption. We converted new patients added during the disruption and drove new patient enrollment forms successfully. The strong relaunch demonstrated the continued ability of our commercial team to execute. We were able to rapidly restart existing patients on therapy once we resumed Supply of Tepeza. As we discussed last quarter, two groups of patients were involved. First, patients who were on therapy when the supply disruption began or disrupted patients. And second, new patients enrolled during or prior to the disruption who had to wait until after supply resumed in April to start taking Tepeza. The second group of patients added based on our continued promotional efforts during the fourth and first quarters of this year. As expected, the vast majority of disrupted patients resumed therapy in the second quarter. New patients with PEPs generated prior to or during the disruption also started to PESA very rapidly. The rapid access to therapy for both these new patients and the disrupted patients was driven by the execution of our field-based teams, who continue to remain in constant communications with physicians, patients' insight of care throughout the first quarter. We're very pleased to see the strong growth of PEPs during the disruption, a trend that continued post-relaunch. We attribute this continued strong growth in the patient demand due to the fact that our new and existing prescriber base continues to increase. We're also seeing increased conviction from these prescribers, with two-thirds of them running more PEPs in the first half of 2021 than in the second half of 2020. Finally, given the rapid relaunch, we have accelerated and significantly increased our investment in direct-to-consumer marketing initiatives with very positive results, notably from our branded and unbranded television campaigns, which have been increasing awareness about TED and TPEZA. Our goal for these national campaigns is to increase awareness of TPEZA and accelerate the speed to diagnosis and treatment. We are enthusiastic about the prospects for TPEZA to help more patients address the serious, debilitating, and sight-threatening aspects of TED. Given the second quarter's better-than-expected results and continued strong new patient growth, we increased our full-year TPEZA net sales guidance to more than $1.55 billion, which is near a doubling of net sales in our second year of launch. As we discussed last quarter, our guidance continues to assume that the third quarter is the highest net sales quarter in 2021. This is a function of disrupted patients completing treatment, patients with PEPs generated in the fourth and first quarter starting treatment after the April resupply, and new patients starting treatment in the third quarter. The outperformance of the relaunch positions us for strong year-over-year growth of more than 50% in the fourth quarter this year. driven by continued strong PEP generation after the April relaunch. Tepes is one of the most successful rare disease medicine launches ever. There's still tremendous upside opportunity, and we're focused on driving greater penetration, both in the acute patient population as well as the untapped chronic opportunity. We remain well on track for our peak global net sales estimate of more than $3.5 billion. With Cristexa, we delivered outstanding results for the quarter, generating record net sales of $130 million, with year-over-year growth of 73%. A key driver of this quarter's strong growth was the increasing adoption of Cristexa plus immunomodulation, the core part of our strategy to maximize the value of Cristexa and enable more patients with uncontrolled GEM to benefit from the medicine. Use of Cristexa plus immunomodulation for new patients is now at more than 40%. which we attribute to the greater clinical conviction of physicians who use Cristexa plus immunomodulation. We look forward to the results of the mere randomized controlled trial in the fourth quarter of this year, which is evaluating Cristexa plus methotrexate versus Cristexa alone. A strong execution is driving growth in Cristexa prescribing physicians, both rheumatologists and nephrologists. For nephrology in particular, we created a dedicated nephrology sales team early this year, and they have already driven more prescribing nephrologists in the first half of this year versus all of 2020. In addition, our messaging on the safety and efficacy of Cristexa is resonating with nephrologists, which has been reinforced by the positive interim results from our PROTECT trial for kidney transplant patients who have uncontrolled gout. We're encouraged by what we're seeing in nephrology with significant upside opportunity ahead. As a result of our execution, Christexa PAFs and new patient starts both increased by strong double digits in the second quarter, which sets us up well for the second half of the year. With Aplizna, our humanized monoclonal antibody B-cell depleter, we generated second quarter net sales of $14.5 million. Pleasant is indicated for the treatment of NMOSD, a severe, rare, relapsing, neuroinflammatory autoimmune disease that attacks the optic nerve, spinal cord, and the brainstem. The timing of approval at almost the height of the pandemic last year proved to be very challenging for Veal Abio. We are planning on executing a relaunch of the medicine over the second half of this year, leveraging the patient-centric approach we used for both Tepeza and Cristexa. Commercially, we're focused on rebuilding and expanding the sales team and establishing a robust commercial structure to support the complex aspects of the Polizna patient journey. We made good progress on this in the second quarter and expect to complete the commercial expansion by the end of the third quarter. We're also leveraging support services we built for TPEZA. For example, as with TED specialists, many NMOSD specialists do not have infusion capabilities We are leveraging our extensive TPEZA site of care network to support patient referral to infusion centers, which was a gap in the initial Implizna launch. On the clinical side, we're investing in medical and scientific engagement to develop our scientific leadership position in NMOSD. This includes conducting further analysis of the Implizna clinical programs to expand understanding by the prescribing community of its differentiation as well as continuing to build a base of compelling real-world evidence supporting the use of APLISNA. In addition to presenting new data at several key medical meetings, which Liz will touch on, we've been actively reaching out to key NMOSD opinion leaders who welcomed our entry into the market and expressed enthusiasm for the differentiated approach APLISNA offers in treating NMOSD. It takes time to establish infrastructure and educate stakeholders about a new medicine. In fact, we began our market preparation for Tepesim more than six months before we launched it. With a pleasant, we're off to a good start and expect to see the benefits of our new commercial organization and investments as we exit the year. I'll now turn the call over to Liz.
spk06: Thank you, Tim, and good morning, everyone. The second quarter of 2021 marked another quarter of progress in R&D where we continue to focus on expanding our pipeline. We have 22 programs spanning the development lifecycle, from preclinical to post-marketing trials, which this quarter includes the addition of a new preclinical next-generation uncontrolled gout program through our collaboration with Arrowhead. Today, I'll focus on the progress we've made on our key programs. In September, we'll be doing a deeper dive into our key programs at our Investor R&D Day, which will incorporate our evaluation of the VIELA programs we acquired in March, along with new programs planned, as well as our portfolio and overall R&D strategy. A highlight of our recent progress is our Global Collaboration and License Agreement announced in June with Arrowhead for ArrowXDH, a discovery stage investigational RNA interference or RNAI therapeutic being developed as a potential treatment for people with uncontrolled gout. RNAI is a natural cellular mechanism that uses a gene's own sequence to essentially turn that gene off, silencing gene expression and regulating the production of proteins. AeroXDH leverages this natural pathway of gene silencing. which in this case can then be used to silence the XTH gene in the liver. XTH is the primary source of uric acid and represents a clinically validated target. As the leader in gout, we're uniquely positioned to successfully develop and commercialize the candidate that comes out of this program. There remains a significant unmet need in treatment of uncontrolled gout. Roughly one-third of the 9 million gout patients in the U.S. are treated with oral urate-lowering therapies. but a meaningful portion of these patients do not respond sufficiently to treatment and therefore continue to experience painful and debilitating gout symptoms. We expect to enter the clinic with aeroXDH within the next two years. Moving to HCN7734, in June we initiated our Phase II trial for the treatment of systemic lupus erythematosus, or SLE. HCN7734 is a plasmacytoid dendritic cell, or PDC, depleter, an anti-ILT7 fully human monoclonal antibody with a differentiated mechanism of action. In healthy individuals, PDCs are present in low numbers, driving an appropriate immune response to fight infection. In individuals with certain autoimmune diseases, PDCs are found in high concentrations in disease tissues, resulting in significant inflammation and tissue damage that are the hallmarks of autoimmune disease. Our SLE trial is evaluating HCN7734 in the treatment of people with moderate to severe forms of SLE, and we expect to enroll approximately 195 participants. The primary endpoint of the trial is the effect of HCN7734 compared with placebo in reducing SLE disease activity using BCLA, a commonly used index that measures lupus outcomes. We anticipate results in 2023. In addition, at the end of May, our work on this mechanism was published in the journal Science Translational Medicine, showing that PDC depletion may interrupt the cycle of inflammation that causes tissue damage in diseases such as lupus and other autoimmune and inflammatory conditions. Moving to HCN 4920. This is a CD40 ligand antagonist that blocks T cell interaction with CD40-expressing B cells, thereby disrupting the overactivation of the CD40 ligand co-stimulatory pathway. HCN4920 is currently in Phase II development for indications that involve immune overactivation. One such indication is Sjogren's syndrome, a chronic systemic autoimmune condition that impacts exocrine glands. Patient enrollment in this trial continues. Our other two HCN4920 trials in rheumatoid arthritis and kidney transplant rejection are ongoing. In June, we presented results of an observational follow-up of the Phase 1B study conducted in patients with active rheumatoid arthritis. The purpose of this assessment was to estimate the duration of clinical improvement in trial subjects beyond the three-month safety follow-up period following the last administered dose of HCN4920. While the interpretation of this study is limited, and duration of benefit could not be defined in these studies, these early data suggest a possible longer-term benefit of HCN4920. Of those patients with long-term follow-up, most remain better than baseline for more than two years after the last administered dose. HCN825, our oral selective LPAR1 antagonist, has shown early signs of clinical impact in fibrotic disease. We have two development programs for HCN825. one in diffuse cutaneous systemic sclerosis, and one in idiopathic pulmonary fibrosis, or IPF. The sclerosis trial is screening now, with enrollment for both trials expected to begin in the third quarter. Moving to TPEZA, we continue to see information accumulate in the literature about the successful use of TPEZA in chronic TED. At this point, there are six published patient case reports or case series that that details successful treatment with TPEZA in 52 patients with chronic TED, which is compared to the 41 acute TED patients treated with TPEZA in the Phase III clinical trial. We're also progressing with our Phase IV placebo-controlled trial, evaluating TPEZA for use in patients with chronic thyroid eye disease. In this trial, we'll be looking at chronic TED patients who are three to eight years post their TED diagnosis. As a reminder, TEPASA has a broad indication for all TED patients, and physicians can and do prescribe TEPASA for chronic patients today. The objective of our chronic trial is to generate clinical data to better inform payers and physicians about the performance of TEPASA in chronic patients. Based on continued discussions with our principal investigators, we've decided to increase the target enrollment to approximately 60 patients to increase the robustness of the trial. We expect enrollment to begin in the coming weeks and anticipate a data readout in the second half of 2022. We continue to advance our TPEZA subcutaneous administration program, which could potentially offer additional flexibility for patients by shortening the administration time and time spent with healthcare practitioners. We hope to have initial discussions with the FDA later this year around our plans for bringing a subcutaneous version of TPEZA to the market. Regarding our clinical program for Tepesa in Japan, we're on track to submit our trial design to the Pharmaceuticals and Medical Devices Agency later this year. For Aplizna, our anti-CD19 humanized monoclonal antibody B-cell depleter, enrollment continues in our two Phase III randomized controlled trials, one evaluating Aplizna in myasthenia gravis, or MG, and the other in IgG4-related disease. MG is a chronic, rare, autoimmune neuromuscular disorder that affects the voluntary muscles of the body, especially those that control the eyes, mouth, throat, and limbs. IgG4-related disease refers to a group of disorders marked by tumor-like swelling and fibrosis of affected organs, such as the pancreas, salivary glands, and kidneys. For the NMOSD indication, we aim to maximize aplysna for patients. by educating physicians and the medical community about its benefits, a key component of our APLISNA relaunch. One of our priorities is to continue to build a robust body of evidence supporting the efficacy and safety of APLISNA and NMOSD. We've participated in numerous medical meetings this year and continue to highlight key APLISNA clinical data in medical journals. These presentations and publications highlight three key findings. the analysis of long-term data from the APLISNA Phase III NMOSD trials showing that APLISNA provided sustained reduction of NMOSD attacks for 87% of APLISNA patients for up to four years. Second, additional data demonstrate that APLISNA improved disability outcomes regardless of baseline status, attack history, or disease duration. A third set of data showed that patients on APLISNA with prior rituximab exposure showed experienced a meaningful reduction in NMOSD attacks. Regarding Cristexa, in the second quarter, we initiated our trial evaluating the concomitant use of Cristexa plus methotrexate for people with uncontrolled gout who did not achieve a complete response when previously treated with Cristexa alone. We continue to advance five clinical trials to increase the benefits and convenience of this medicine for patients. So, to recap our upcoming milestones, We currently expect our TPEZA chronic TED trial to begin enrollment in the coming weeks, and we expect to begin enrollment in our two HCN825 trials in the third quarter. We expect top-line data for both our Cristexa mirror randomized control trial and PROTECT trial by the end of the year, and TPEZA chronic data in the second half of next year. In 2023, we expect data from our APLISNA trials in myasthenia gravis and IgG4-related disease our HCN 7734 SLE trial, and our HCN 4920 trial in Sjogren's syndrome. I look forward to providing additional details on our key pipeline programs during our R&D day in September, as well as updating you on our continued progress on our next earnings call. I'll now turn the call over to Paul.
spk01: Thanks, Liz. My comments this morning will primarily focus on our non-GAAP results, unless otherwise noted. Second quarter net sales were $833 million, representing year-over-year growth of 80%. Our significant outperformance this quarter was driven by the successful relaunch of Tepeza and the continued strong growth of Cristexa, as well as our other rare disease medicines. Our orphan segment generated net sales of $747 million, a year-over-year increase of 97%. Orphan segment operating income was $321 million. Net sales for the inflammation segment were $86 million, and segment operating income was $47 million. We continue to focus on maximizing the cash flow generated from this segment to reinvest in our growth drivers and our expanding pipeline. Our non-GAAP second quarter gross profit ratio was 88 percent of net sales. Non-GAAP operating expenses were $362 million. This included non-GAAP R&D expense of $81 million, or 10 percent of sales, and non-GAAP SG&A expense of $281 million. Second quarter adjusted EBITDA was $367 million, representing year-over-year growth of 92 percent. The non-GAAP income tax benefit for the second quarter was $36 million. As we have seen in prior years, there can be variability in our tax rate across quarters. We expect the tax rate in the second half of the year to be in the mid-teens, which offsets the low tax rate in the first half and brings our full-year tax rate in line with our projected low double-digit rate. Non-GAAP net income in the quarter was $381 million, and non-GAAP diluted earnings per share were $1.62. The weighted average shares outstanding used to calculate second quarter 2021 non-GAAP diluted EPS were 235 million shares. Second quarter non-GAAP operating cash flow was $147 million. As of June 30th, cash and cash equivalents were $812 million, giving us significant flexibility to invest in our growing operations. This includes additional strategic transactions to further expand our pipeline. The total principal amount of our outstanding debt is $2.6 billion, with the earliest maturity in 2026. As of June 30th, our gross debt to last 12 months adjusted EBITDA leverage ratio is 2.3 times, which is an improvement from the March 31st ratio of 2.8 times. We still expect to be at our gross leverage target of two times by year end 2021. Turning now to our guidance. This morning we announced that we are increasing our full year 2021 net sales guidance range to $3.025 to $3.125 billion, from $2.75 to $2.85 billion. This reflects an increase in our full-year TPEZA net sales guidance to more than $1.55 billion, representing year-over-year growth of more than 89%. As Tim noted, we expect the third quarter to be TPEZA's highest net sales quarter of 2021, and we expect year-over-year net sales growth of more than 50 percent for Tepeza in the fourth quarter. With Cristexa, we continue to expect net sales of more than $500 million for the year, representing strong year-over-year growth of more than 20 percent. We are also increasing our adjusted EBITDA guidance range to $1.26 to $1.3 billion from $1.02 to $1.06 billion. We continue to expect our non-GAAP gross profit ratio for the full year to be between 86 and 87 percent. We expect 2021 R&D expense to be in the low double digits as a percent of sales. We expect non-GAAP net interest expense for the full year to be approximately $75 million. We continue to expect a full year non-GAAP tax rate in the low double digits. We estimate that our cash tax rate will be in the high single digits in 2021. As always, our tax rates could change significantly as a result of any acquisitions or divestitures we may make or any changes in tax laws. We continue to expect full year 2021 weighted average diluted share count to be approximately 235 million shares. With that, I'll turn it over to Tim for his concluding remarks.
spk00: Thank you, Paul. We continued to execute on our strategy to expand our pipeline for future growth and maximize our key on-market medicines. We had a next-generation gout program to our pipeline with the Arrowhead program, and we initiated three new clinical programs. We generated record financial results, driven by Tepeza, Cristexa, and our other rare disease medicines, where we see continued strong underlying demand. As a result, we increased our guidance for full-year Tepeza net sales, total company net sales, and adjusted EBITDA. Two weeks ago, we rang the opening bell at NASDAQ celebrating the 10th anniversary of our initial public offering. We have accomplished so much since then when we just had two on-market medicines. Today, we are a leading, high-growth, profitable biotech with a market cap of more than $20 billion, a portfolio of rare disease medicines that make a difference for thousands of patients and a robust pipeline of 22 programs spanning the development lifecycle and a path for much future growth to come. It speaks to the value of having the right strategy, remain focused on executing, and having an excellent team of people driving it. We look forward to reporting on our progress again next quarter, and we'll now open the call up for questions.
spk08: Thank you, Tim. Justin, if you could please go ahead.
spk02: Thank you. As a reminder to ask a question, you'll need to press star 1 on your telephone. To withdraw your question, press the pound key. Please stand by while we compile the Q&A roster. And once again, that is star 1 if you'd like to ask a question. And our first question comes from Annabelle, so am I, from Stiefel. Your line is now open.
spk07: Hi, all. Congratulations on a great quarter as usual. So, You know, this seems kind of silly to ask because TAPESA has exceeded so tremendously, but could you provide a little bit more granularity around the acute versus chronic penetration? We're starting to hear a little bit from the field that they're seeing more pushback on the chronic population as far as reimbursement is concerned. So I just wanted to understand what you're doing there as far as supporting that group and what the penetration is there. And then on Euclidna, You had quite a bit of data presentations at several conferences now. What are you hearing as far as reception from community physicians now versus academics who still seem pretty comfortable with Rituxan? Thanks.
spk00: Sure. I'll address the first, and Liz can touch on the data. Relative to acute versus chronic, I think things continue to move well. same general framework of high single digits in the chronic population. When we look at time from that original PEP generation to patients getting treated, it's definitely faster in the acute population, so that has not changed. The chronic does take a little more time, and there's more data requested, and that's where if you look at what Liz reviewed, we have 52 patients now that have been studied across a series of case studies, versus 41 patients that we had in our phase three program. So we're generating significant data. That data certainly helps as we get requests from the reimbursement process. So we continue to expect the chronic to take longer, but those patients are getting through, and it remains high single digits as a percentage of the overall population. One note on Aplysna, We are continuing to, first of all, complete the expansion, so we've been reworking our sales and overall field team. We're going through that expansion process, and we expect to be done here in the third quarter. We are hearing there's a lot of rituximab patients being switched to biosimilars. That does open up the opportunity for physicians to have a dialogue and consider other options for patients, but we continue to have good initial discussions, and Liz can speak to some of the data and what we're hearing there.
spk06: Yeah, so, you know, certainly building the profile of a drug is a process, and it takes time and it takes data, but some of the information we've been able to share recently are the kinds of pieces of information that do seem to be resonating with physicians. You know, data is suggesting that there's long-term efficacy, that you can see, you know, a high proportion of patients who are going to tack-free for up to four years. data showing that there's an impact on disability, and importantly, with respect to rituximab, showing that patients who have had prior exposure to rituximab are able to do well on aplizna, and that includes those patients who had attacks while they were on rituximab. So again, it's a process, it's a conversation, but we do think we're generating and sharing the kind of data that is going to be meaningful for physicians. Thanks, Annabelle. Justin, next question, please.
spk02: And thank you. And our next question comes from David Schott from J.P. Morgan. Your line is now open.
spk04: Hi, I think it's Chris Schott at J.P. Morgan. Just a couple of quick ones for me. I guess first, on the implied fourth quarter sales for Tepeza, I think that's north of a $2 billion annualized number. I'm trying to get a sense, is that a good run rate to think about for underlying demand, or is there still some of the restart demand? business occurring in that fourth quarter number. I'm just trying to get a better sense of how to think about 2022 and beyond and kind of how we're exiting the year. And then the second question was just a little bit more color on the ramp that you're seeing in terms of the breadth of the physicians prescribing. I think you talked last year about how you were seeing some kind of rapid adopters who were having a lot of use, then a lot of physicians who maybe had like one or two patients on I think today you mentioned kind of seeing broader physician adoption of the drug. I'd just be interested in just any of the dynamics that you're seeing with Tepesa on that front. Thanks so much.
spk00: Sure, Chris. Thanks. With the primary target, which is oculoplastic surgeons, we continue to see greater penetration. We're seeing a strong increased penetration in our ophthalmic surgeons, and we're beginning to see some increase in both ophthalmologists or general ophthalmologists, and to a smaller extent, the endocrinology community. So it's still a focused prescriber base. We have about 6,000 targets, and we continue to see more prescribers and more prescriptions per prescriber. So across the metrics that we look at, we're seeing very positive trends. And if you look at the quarter, we not only converted those disrupted patients and but the team did a great job of converting those patients that were on hold from the fourth quarter and first quarter into patients being treated, and that's what's going to drive really through the third quarter of growth. And the underlying growth that we're driving now is really what's going to set up that fourth quarter year-over-year growth that you commented on and relative to the $2 billion run rate. So we certainly think that's reasonable.
spk08: Thanks, Chris. Justin, next question, please.
spk02: Thank you. And our next question comes from David Anselm from Piper Sandler. Your line is now open.
spk10: Thanks. So just a couple. First on Cristexa, regarding the specialist mix, I think you had talked about nephrology being an opportunity. So can you talk about, you know, what kind of traction you're getting in that community? And just in general, are you noticing deeper penetration there, not just in nephrology, but also in rheumatology? And then secondly, can you just talk broadly about business development? Obviously, with the yellow bio, that's a transformative transaction. And then you had a more recent transaction for an earlier stage product than GAP. But can you talk about your priorities? How big can you go? Or are you willing to go going forward? Or should we think about your priorities being more bolt-on assets to bolster the pipeline? Just wanted to get your thinking there. Thank you.
spk00: Sure, David. Thanks. On BD, we continue to look at research and development projects. based medicines and those type of bolt-on acquisitions like we did with Arrowhead and Curzion for HCNA25. So that is the primary focus of our business development efforts. Like we did with Viola, if an opportunity presents itself that strategically is well aligned as Viola was, we'll certainly look at that. That was something that with our balance sheet and our access to the debt capital markets, it was very easy for us to integrate that in. So we won't rule out larger transactions, but our focus is certainly on what we've been doing with deals like Arrowhead and Curzion. So you just expect to see more acquisitions or licensing transactions like that. To your question around Cristexa, we're really pleased with the uptake as we refocused in nephrology with a dedicated sales force beginning in the early part of this year. And as I mentioned in my remarks, we've seen more prescribers in the first half of this year versus all of 2020. So certainly seeing acceleration based on that focus and up to half of patients with chronic kidney disease can have chronic uncontrolled gout. So the patients are there. It's just raising that awareness and making them attuned to the fact that Cristexa can make a difference in those patients. So we're definitely seeing accelerating prescriptions. You know, one of the things that if you look at the fact that we're over 40% of Cristexa plus immunomodulation right now is that it's that opportunity to go back to physicians early in the launch phase before we acquired Cristexa that didn't have a good experience. And we're looking at our retreatment trial, but we're also seeing physicians proactively say, you know what, with immunomodulation, you know, that is a reason to believe I can restart prescribing Crespexa to a number of these patients. So we're seeing reinvigoration of rheumatologists that haven't written in the recent term. So all of that is contributing to the strong growth we saw in the quarter and we expect throughout the rest of this year.
spk08: Thanks, David. Justin, next question, please.
spk02: Thank you. And our next question comes from Ken Cassatore. Your line is now open.
spk03: Congratulations, team, on the performance. Tim, I wanted to ask about the advertising. It's really interesting to see, obviously, advertising on TV, and I'm guessing this has as much implications of raising awareness for clinicians as it does for patients. So just wondering, as we're deeper into the launch, are you seeing any signs of earlier diagnosis, kind of broader clinician base that's looking at the disorder? maybe now earlier treatment. So as we think about the 15,000 to 20,000 patients that you've cited kind of on an annual basis, is there any movement there, given that you're advertising? And then, obviously, nice commentary around demand, but just more specific around the enrollment forms. Are we seeing that nice, steady kind of month-over-month increase? And then lastly, on Uplizna, really great clinician feedback. I know you've talked about the size of this product. before. As you work through and continue to invest behind it, it does look like this could be a billion dollars and above product opportunity, just in the lead indication. Any more kind of commentary as you guys have dug in a little bit deeper and invest behind it? Thoughts on peak and just the primary indication? Thank you.
spk00: Sure. With the Plymouth, we see it as a billion-dollar opportunity across all indications with NMOSD and myasthenia gravis, as well as IgG4-related diseases. So certainly we're off to a good start. Had some good growth in the quarter, but certainly need to complete our expansion here over the third quarter, and we expect to see the kind of growth that we're used to seeing from our business as we exit the year. So I'm feeling really good about how it's starting to set up, the type of people that we're adding to that organization. From a DTC perspective and overall promotion, one of the things that we knew early on is patients can get misdiagnosed frequently with TPEZA or kind of get lost in the endocrinologist or in the ophthalmologist's office. So we knew we had to not only drive the primary effort with our sales force with osteopathic surgeons and neuro-ophthalmic surgeons, but we had to activate patients, and that's about you know, that earlier diagnosis and ultimately getting to the right specialist. So our DTC effort is about getting physicians or getting patients to seek a specialist and get appropriate treatment. So it's not about earlier in the course of the disease. It's really about getting to that 15,000 to 20,000, continuing to increase penetration. And all the metrics we look at are DTC, whether that's the unbranded focus on patients treating and understanding TED and getting the right specialist involved. Both that and the Tepeza branded advertising are outperforming typical benchmarks and continue to generate strong growth in our specialist finder hits and patients seeking to get the right treatment. So all of that is performing exceedingly well. And in the quarter and throughout the rest of the year, we're going to continue to increase our investment in DTC because we see it as a strong growth driver for Tepeza.
spk08: Great. Thanks, Ken. Justin, next question, please.
spk02: Thank you. And our next question comes from Jason Gerberry from Bank of America. Your line is now open.
spk11: Good morning. Thanks for taking my questions. So my question was on the Nature Eye publication regarding TEPRO in chronic TED. And your thoughts, how that impacts your thinking for the soon-to-be-initiated Phase 4 study and the representativeness of those patients and what you saw in terms of variability patient-to-patient in terms of the level of response. And then secondarily to that, you know, is this data that you can start to leverage in the field You know, chronic TED is not off-label, so I imagine, you know, it's something that is certainly permissible for physicians to use Tepro in that setting, and we did see a lot of momentum for Christexamethotrexate as investigator data started to accrue. So just sort of wondering how this, you know, emergence of data could be a tailwind for the Tepro franchise. Thanks.
spk00: Thanks, Jason. I think you hit it accurately in your commentary in that We've got 52 patients across a series of case studies that are chronic patients compared to the 41 we had in our whole Phase III program treated with TPEZA. So that's data. It is within our label to discuss that. So we see a lot of interest like we did with Cristexa and the early case series that generated a lot of interest in the community. So that's all good data. It's especially helpful in the reimbursement and appeal process that typically patients go through in getting treated for chronic thyroid eye disease. So all of that are positive trends. Liz, do you want to speak to the Nature publication?
spk06: Yeah, absolutely. It's been interesting and exciting, frankly, to watch the literature that's accumulated over the last year or so around TPEZA in chronic thyroid eye disease. including the Nature Eye publication. What we see generally speaking across these is good results in a variety of chronic to ED patients, and that is important because it is a heterogeneous population, so that's been very reassuring. To your point, you know, while we do see good, strong responses, we do see variability, and so we have taken that into account as well as discussions with our principal investigators when we made the decision to increase the size of the trial to account for the possibility of larger variability. But overall, we're really heartened by what we're seeing in that publication and just across the literature generally in chronic TED. Thanks, Jason. Justin, next question, please.
spk02: Thank you. And our next question comes from Gary Notchman from BMO Capital Markets. Your line is now open.
spk12: Hi, good morning. First, on the strong recovery for Tepeza, did you have to expand the infusion network at all to meet the increased demands Is that where it needs to be, and are you still working on home infusion? And talk more about how you'll leverage that with Euclid on that relaunch like you talked about earlier. And then on Euclid with the relaunch in NMOSD, are you satisfied where reimbursement is right now, or does that need some improvement before the end of the year? And could you potentially see some off-label use where B-cell depleters might be used, maybe even in NG or IgG4 even before having that data available. Thank you.
spk00: Sure. Thanks, Gary. From a site of care standpoint, I believe we have over 1,000 site of care institutions within the network that are currently involved in infusing TPEZA. So there has not been a bottleneck there at all, and we don't see that as a rate limiter. Home infusion is generally driven by payers and something that we don't have a lot of control around at this point in time. So we are seeing it here and there, but that's going to evolve over time as different payer dynamics evolve. Relative to reimbursement on a PLSNA, we're not seeing that as a rate limiter. The biggest aspect is getting our promotional activities and our broad field-based organization in place. So what's gonna drive that is us getting the type of organization in place that we believe is needed to drive the uptake in NMOSD. I have not heard of any use outside of NMOSD, and we don't see that as a near-term driver. It's really about getting the expansion and our field-based organization done by the end of the third quarter and getting back to just executing and driving that differentiation that a lot of our recent clinical data has continued to show is a positive for Plisna.
spk08: Thanks, Gary. Justin, next question, please.
spk02: Thank you. And our next question comes from Levan Tai from Citi. Your line is now open.
spk05: Hi, good morning. Thanks for taking my questions. Can you help us with the evolution of Tepesa in Q2 during the quarter? And did the May TV campaign have early benefits on patient enrollment forms? And then on chronic TED, could you comment in terms of proptosis reduction? And do you think payers are becoming aware of those case studies? Thank you.
spk00: As far as the awareness of the case studies, that is going to continue to increase over time. I think the awareness on the chronic TED is around the typical prior authorization process and appeal process that patients go through where that data is then provided upon request. So that is definitely part of the process. Relative to To PESA in the second quarter, the vast majority of the disrupted patients were treated or reinitiated treatment. On average, they were about halfway through their eight infusions. And we also were able to rapidly convert the patients who we weren't able to start who were generated, where PEFs were generated in the fourth quarter and in the first quarter, and we saw great progress there.
spk08: Thanks, Devon. Justin, we've got time for one more question, please.
spk02: Thank you. And our last question comes from David Steinberg from Jefferies. Your line is now open.
spk09: Thanks. Good morning. My first question relates to operating margins. It looks like you posted a very strong quarter among other factors in terms of margins in the mid-40s. I know that this is intended to be an investment year. Any thoughts on where op margins could go over time? Could they reach the 50% level? Secondly, another follow-up on your DTC ads. I know, Tim, you mentioned they've been very productive. You know, one of the Ocuplastic KLs we talked to said early in the launch about a third of the patients who came in, you know, had a piece of paper that said Tepeza because of word of mouth. And he just said he's had a couple of patients who came in and saw the ads, and he's given them a prescription. Just curious, I know it's a soft metric, but, you know, what percent of the patients do you think are coming in and requesting a script simply because they saw the TV ads? And finally, um, XUS, I know you've highlighted the peak sales from the Asian opportunity and you're adding infrastructure in the EU. Any update on, on, uh, attaining orphan exclusivity in Europe in the coming months? Thanks.
spk00: Sure. Thanks, uh, David. I appreciate it. Um, with, uh, The DTC, looking at, we don't have a metric on percentage of patients that saw it. We are qualitatively hearing that patients are responding. And the key thing there is really about driving patients to a specialist finder so they can find someone who is versed and regularly treats thyroid eye disease. And we're seeing very good progress there in visits to the specialist finder qualitatively we are hearing some of the same stories that you are. So don't have a specific number there. From an ex-U.S. standpoint, with Tepeza and international markets outside Europe, we continue to prepare, as Liz talked about, getting progress on the protocol for Tepeza in Japan. We continue to ramp up our pre-launch efforts for Plisna in Europe, for we don't have an update on orphan drug designation for Tepeza in Europe at this point in time.
spk01: And on margins?
spk00: On margins, Paul?
spk01: Yeah, David. So, you know, you're right. We expect, you know, margins this year in the low 40s when you look at our guidance, the midpoint of the EBITDA and sales guidance. And, you know, we expect to continue the margin expansion next year, 22 and beyond, as We absorb Diela and all these R&D programs, and we really drive Cristex and Tepeza towards their peak sales. And we would expect to get to rare disease-like margins for the company, which we've said is near that 50% mark.
spk08: Thank you, David. And thank you, Justin. That concludes our call this morning. A replay of this call and webcast will be available in approximately two hours. Appreciate you joining us.
spk02: this concludes today's conference call thank you for participating you may now disconnect
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