This conference call transcript was computer generated and almost certianly contains errors. This transcript is provided for information purposes only.EarningsCall, LLC makes no representation about the accuracy of the aforementioned transcript, and you are cautioned not to place undue reliance on the information provided by the transcript.
Operator
at no cost to new commercial patients. Again, that was put in place in response to the pandemic. It really helped us achieve record market share in the second and third quarter, and was very well received, and we expect the benefits of getting those patients on board to continue, but it did cost us some average net revenue per prescription in the second quarter. For the fourth quarter, we're not gonna give specific guidance, but I'll comment that if you look historically, we've been above $200 for average net revenue per prescription every third quarter and fourth quarter from launch. And our guidance remains the same, that we continue to expect the yearly average net revenue per prescription to increase throughout the year because of the reasons I mentioned earlier. With respect to revenue, You know, we had, if you recall, we had revenue guidance out pre-COVID. We did withdraw that guidance, as many companies did, in response to the pandemic when we had our 2Q call, I believe, in May. And, you know, at this point, we're not comfortable putting new guidance out there for the full year. I will point, though, to the prescription growth. that we've continued to see in spite of the pandemic. I think 11%, Q2 to Q3 in TRX growth, and the continued strength of the average net revenue per script, which I just talked about. So we'd keep both of those in mind as you're thinking about what 4Q will look like.
David
Thank you so much.
Dave
Next question, David Steinberg with Jefferies.
David Steinberg
Thanks, and good morning. I have three questions. So the first one is, can you give us some more color on the Kaleo collaboration, and in fact, are they actually starting to help generate scripts, or will that be not until next year? Update on refills, what's the current thinking in terms of what you're saying in terms of average patient refills per year? And then finally, just thinking out a few years, What's your latest thinking, Peter, on what kind of revenues you need for X-Hands to break even? Thanks.
Peter
Thanks, David. Appreciate the questions. As I said in my remarks, David, I'm really excited about Kaleo. They're a team that's built a very strong business with their Avacu products. They know how to build a business. They have pre-existing relationships already with the roughly 3,000 they're going to call on incrementally in addition to the other audience that's going to be overlapped with our territory managers. So I'm very, very excited about it. I think it's going to take some time, David, to really see the impact of Caleo. We're hearing it anecdotally already for sure. We trained them literally. They really went out on their first calls in early October. So I think as the fourth quarter progresses, you know, I think you'll start to see impact. And, you know, I think when you'll really see impact is across 2021 is my expectation. Regarding refills, you know, again, I'm really encouraged, David, that, you know, as a reminder, you know, typical refills in the intranasal steroid category are about two per year. So with typical INS gets about two refills per year. We came in believing that four was a reasonable target for the product. And we have, in fact, gotten to four, and we're still growing in refills. We're currently between four and four and a half on a monthly basis. And I expect at some point that's going to start to top out, David, because there's only so many months in a year, candidly. But it's a really good, clear indication that patients are really well satisfied with the product and understand the importance of using it every day. And that's part of the messaging that we work on trying to deliver to patients about proper use of the product. You know, in terms of, you know, revenue, you know, looking forward and to break even, it's probably better if I pass that to Keith. So, you know, Keith, I'll let you sort of address that.
Operator
Yeah, David, I'll make a comment that we've said before. You know, we have a pretty robust infrastructure here. If you just look at our OpEx for last year, which was $125 million, our latest guidance right now is the updated guidance that we gave today is 127 and 132 for this year. So we have two years of basically flat OpEx. Obviously, we're going to be able to grow revenue quite substantially today. That infrastructure, you know, we are going to continue to get leverage on as we continue to grow Ex-Hance. So, you know, I'll let you guys do the math, but, you know, we have robust gross profit margins, you know, historically have been in the mid-80s. And, you know, with an expense base that I think, I'm not going to give guidance, but I think, you know, you can expect it to grow modestly, but not incrementally. Again, we... We have a lot of leverage to get on our fixed cost base. So with that in mind, I think you can do the math in terms of where a chance needs to be to turn the corner.
Peter
And probably one other comment I'll make, and this is, again, obvious, and you guys can do the math, but I'm glad you asked the questions on refills, David, because we made the comment in the remarks that as we continue to build new prescriptions on you know, that sort of, we call it the top of the funnel, that then turns into significant number of refills downstream. So, you know, as we have the combination of continuing to grow NRX and, you know, very high refill rate now and even continue to increase, it's why we just feel really good about the business right now.
Operator
And the last thing I'll add, David, is that, you know, we have a pretty heavy investment in R&D really on the D side this year and next year. as we're kind of full, you know, all in on the two Phase III-E trials, exploring a chance for the treatment of chronic sinusitis. Per our guidance, we expect top-line data in both of those trials next year. So, you know, after that, we have R&D optionality, I'll say. So we can, you know, either choose to invest in new programs or, the expectation should be our development costs in the R&D line should decrease in 22 and beyond as those trials complete.
David Steinberg
Okay, thanks.
Operator
Thanks for the question, Dave.
Dave
Next question, Brandon Fork.
Brandon Fork
Hi, thanks for taking my questions, and congratulations on the results in the quarter. Maybe just drilling down on the results in the quarter, can you just comment in terms of, do you think there's any benefit from a bonus of patients in terms of return to in-person visits in the ENT space? And then maybe just commentary in terms of what you're seeing in that in-person ENT space versus telemedicine post the end of the quarter and how we should think about that going forward. Secondly, maybe, and maybe you can interweave this, is just That intranasal steroid market, I see it continues to decline. Is that just COVID or are there other factors we should consider? And then lastly on CS, there is a competitor running a trial quite a ways behind you. Do you think a first maneuver advantage is going to be significant in that space? Or do you think in terms of which product can be used first is all going to come down to comparative data when they're both on the market? Thank you.
Peter
I'll take the majority. I mean, Vic, you can jump in if you'd like on a couple of questions. Relative to a benefit from a bolus of patients in 3Q, I do not think that was a case at all, Brandon. You know, on the surgical side, you know, you did see, you know, a pretty healthy return on the ENT surgery cases. But clinically, there was not a bolus of patients that just sort of immediately sort of showed back up in 3Q. You know, we're encouraged, by the way, that, you know, from anecdotal comments from physicians, you know, their clinical days, and we obviously benefit, you know, we get prescribed on a clinical day, obviously, as opposed to a surgical day. That's why I drew that distinction. But the physicians we talk with, you know, on average, I'd say the patient volume on a clinical day is not quite back to where it was pre-pandemic, but probably in the 90% range. And I just had a dinner last night with one of the leading physicians in the world. And they believe, by the way, that they're going to continue to see a reasonable return of patients. But it was not a bolus. That's not something that really affected. Relative to your question on telemedicine or in person, certainly in the ENT space, they really don't do a lot of telemedicine because so much of the value that an ENT provides is an actual examination. endoscopically, a visualization of what's happening in the nasal cavity. So there's really minimal telemedicine in that space, and I don't think there will be. Regarding allergy telemedicine, there is more telemedicine in the allergy space, but again, because so much of the allergists do shots and do things that require an actual visit in an office, that specialty is another specialty that does not quite embrace telemedicine. But the good news is, as I said, patients appear to be returning to reasonably close to where they've been historically. Relative to the INS market, we have noticed, Brandon, that the market is not quite back to where it was a year ago. It sort of approached it in the summer months, but as we head into the fall, the INS category is not quite back to where it was. I think the majority of that, Brandon, is COVID-related. You know, despite what I just said, you know, we're not quite back to the patient volumes that we were pre-pandemic, so I think that's an impact. You do have an OTC option for the broader category of INS that can cause some of the decline in that category. But, you know, our, you know, best guess, if you will, is that the majority of it is probably COVID-related in terms of year-on-year comparison. Vic, I don't know if you have anything to add.
Vic
Peter, I think you summarized that really nicely. I think the nice thing about exants is that there are both clinical reasons why you would choose exants and why you would diagnose the nasal polyps, and we've certainly been focused on helping physicians understand how they could do that through telemedicine or how they could do that in an office visit. That's really been our approach.
Peter
Regarding the CS, I think we have two huge advantages in the CS area, Brandon. I think it's based on current timelines, assuming that things go well in our trials, we are going to be first, and we will be the first product that we're aware of to ever get that indication. As a reminder, by the way, you guys know this data, but The physician audience that we're calling on only treats about 2.5 to 3 million of the CRS patients that are being cared for. There are 7 million patients roughly being treated in a broader physician audience, and we believe the CS indication will enable a broadening to that audience. We think, you know, ideally via partnership, it also presents an opportunity to get back into the market the roughly 20 million people who are lapsed from physician care. So we think the opportunity for CS just generally is a very, very big opportunity. I think if things progress the way they're progressing, we will be first. And, you know, candidly, Brandon, I just think we are a really optimal treatment for that population. That, you know, we've established how well we work in chronic sinusitis with nasal polyps. It's getting more and more and more recognized by physicians. And the very simple idea of we have an inflammatory condition that is very difficult to reach behind the nasal cavity, we're reaching it really effectively with our device. It's a very simple, compelling story. So I think we have the advantage of being first, and in my view, obviously, a more compelling message.
Brandon Fork
Great. Thank you very much. That's very helpful.
Dave
Next question, Gary Macklin with BMO.
Gary Macklin
Hi, good morning. It's Rafa on for Gary. I was hoping you could provide an update on ex-hance payer coverage and whether you anticipate any changes heading into 2021.
Peter
Thanks for the question. You know, I always like to remind people, we really have good payer coverage, you know, as we sit here today. You know, it's a, you know, I made this, I made this several times. Vic Clavelli's joined us from Pfizer, where Vic was running a very big business at Pfizer, and one of the things that impressed him was the coverage that we've achieved on the product. So as a reminder, we have 75% to 80% of commercial lives have enhanced as a covered benefit. Having said that, we see wins on the horizon to actually increase that. I think I can talk about some wins we had just recently, right, Keith? So Blue Cross Blue Shield of Florida, We just picked up coverage in October of this year. Florida is a very big market for our business, so that's a great win that the team just very recently achieved. And, you know, in some of the conversations that we're having with payers, as I mentioned in the call, we're really encouraged by the thought leader community in rhinology really more and more and more recognizing how Xhance fits in the treatment paradigm for this disease. And as that more and more gets recognized, there have been publicly, some of the societies have talked about a consensus algorithm in their meetings, and we believe as that becomes more and more public, that gives us really good ammunition to go talk to the payers because it's recognition by the thought leaders in the community of how to treat this disease. And, you know, we have a line of sight to continue to grow that 75% to 80% commercial coverage and continue to expand coverage in Medicare and Medicaid. So we feel we do see improvement in that across next year.
Gary Macklin
Thanks. And then I was hoping you could talk a bit more about your Explore program that you've mentioned in the past. What's the expected duration of that program? And how effective has it been potentially reaching new prescribers?
Peter
It's been really effective. You know, we had two waves of it. Unfortunately, it got interrupted by the pandemic. So we had a couple hundred physicians that we got into the program in the first quarter of this year, and we now have, you know, several hundred more that we enrolled in the program in the third quarter of this year, you know, as we sort of got back post-pandemic. And I'm really encouraged by it. It's a little bit too early to read the real impact, but as a reminder of that program, we specifically targeted physicians we call dabblers. These are physicians who are writing the product. They're just not writing it in the group that we want to get people into of that 15 or more enhanced prescriptions in a quarter. So the goal is to move physicians from dabbling, not being committed users, to being committed users. And The real sort of ammunition we have on that is that we have an opt-in on the patient side on a survey of how they're doing post-treatment of Exhance. And that data is data that we are able to share with physicians, obviously HIPAA-protected and confidential. And we're hoping that, you know, that may have a real impact on physicians seeing the efficacy and the results in their own patients in addition to, all the efficacy data that we share from our pivotal trials. So it's a little bit early to honestly read it because the way we're reading it is not how many prescriptions were written during the timeframe. We're looking at does it increase prescribing once the Explorer patients have completed, you know, the roughly three to six months. Early indications in the several hundred that started writing the third quarter, it looks like it's having impact. But it's a little bit too early to tell.
Dave
Thank you. Last question, David .
David
Hi, this is for David. Thank you for taking my questions. Just a couple quick ones for me. First, could you provide an update on the current split between prescriptions written for patients with nail polyps and those with chronic sinusitis? And then also just following up on the reimbursement front, Could you just remind us of where you are on the Medicare Part D side? I think I remember you mentioned previously that you were working to improve that, so an update on that would be helpful. Thank you.
Peter
Sure. We haven't really seen change relative to the share of business, if you will, that is in nasal polyps versus outside of nasal polyps. We haven't seen any dramatic changes in that for the past year, year and a half. As a reminder, roughly about a third of the business is By the way, in the data set that we have, and I want to remind you that the data set we have, it's not a really perfect data set because physicians don't have a great incentive to actually say whether it's nasal polyps or chronic rhinosinusitis or allergic rhinitis. And as a reminder, they can code for chronic rhinosinusitis, and they may in fact be a nasal polyp patient. So the data is not a terrific data source, but in that data source, roughly a third of of prescribing is in nasal polyps, roughly two-thirds is outside nasal polyps. Relative to Medicare Part D, we actually have reasonable coverage there, you know, in terms of the number, more than the majority of prescriptions in Medicare Part D currently are getting covered. And so, but we'd like to improve that. And, you know, as we think about improvement there, I don't think we're going to see real improvement in Medicare Part D in the early parts of 2021. I think we'll see the real impact of Medicare Part D probably in 2022. But I want to remind you, that is not a very significant part of the overall business for intranasal steroids and for our business specifically. It's really a commercial business. Okay, great. Thank you. Okay, with that... I want to thank everybody for joining us on the call. As I said, we're really excited about what lies ahead for the company, and we look forward to talking to you next year.
Dave
Ladies and gentlemen, this concludes today's conference call. Thank you all for participating. You may now disconnect. Thank you. Thank you. Music. Thank you. Thank you. Thank you. you
Disclaimer