Theravance Biopharma, Inc.

Ladies and gentlemen, good afternoon. I'd like to welcome everyone to the TheraVans Biopharma First Quarter 2021 conference call. During the presentation, all participants will be in a listen-only mode. A question and answer session will follow the company's formal remarks. To ask a question, press the star key followed by the digit 1 on your phone. Again, that's star 1 to ask a question. If listening via webcast, please mute audio on your webcast device before asking a question over the phone. I will repeat these instructions after management completes their prepared remarks. Also, today's conference call is being recorded. And now I would like to turn the call over to Gail Cohen, Vice President, Corporate Communications. Please go ahead.

Good afternoon, and thank you for joining the Theravance Biopharma First Quarter 2021 Conference Call to discuss our business. As always, I remind you that this call will contain forward-looking statements that involve risks and uncertainties, including statements about our development pipeline, expected benefits of our products, anticipated timing of clinical trials, regulatory filings, and expected financial results. Information concerning factors that can cause results to differ materially from our forward-looking statements is described further in our filings with the FDC. Now, I would direct your attention to slide three. Joining us are Rick Winningham, Chief Executive Officer, followed by Rick Bram, Senior Vice President Development, Frank Pascalone, Chief Business Officer, and Andrew Hyman, Chief Financial Officer. Following our prepared remarks, we will open the call for questions. Now, I will hand the call to Rick Winningham for opening remarks.

Thanks, Gail. 2021 is a pivotal year as we progress on the strategy of approaching drug development differently. We're pioneering a new generation of small molecule medicines designed to better meet patients' needs, and this year, driving several clinical study readouts over the next several months. We believe we can deliver medicines that can make a difference because of how we approach the drug design process, as highlighted on slide four. By harnessing our deep understanding of chemical design and the intersection of that design with disease biology, our novel compounds are first delivered to an area in which the disease is active. Thinner molecules are uniquely designed to optimize the activity exposure relationship in the organ of interest while simultaneously minimizing activity outside the targeted disease area. This precise approach aims to expand the therapeutic index of a treatment, which is typically a narrow window for systemic drugs to potentially result in better efficacy and fewer side effects. As I said, the process starts with an understanding of the underlying disease, constructing a molecule in anti-inflammatory space to modify inflammation in specific tissue, whether targeting tissues of the lung, the gut, the eye, or the skin, We rely on our in-house proven translational science and development expertise, complemented by strategic partnerships to create proprietary medicines of unique value to patients, healthcare professionals, payers, and hence investors. We will have three important clinical studies reporting data beginning in the second quarter and throughout the balance of the year. Moving to slide five, you can see all of our key programs. First, let me address the delay in the Crohn's program. Like many working to deliver better treatments to the Crohn's community, we've experienced recruitment challenges. We're working as expeditiously as possible to complete enrollment in order to deliver top-line results for the Isoncetinib program in Crohn's in late 2021 or early first quarter 2022. Outside the Crohn's program, we're delivering on our strategic priorities and remain focused on creating significant value for our shareholders in three ways. As noted on slide six, first, commercial performance, even during a respiratory pandemic for a COPD treatment like upelry, as we shared in the third quarter of 2020, has been contributing to the change of TheraVance Biopharma's financial complexion. As we started 2021, the upelry market share in retail and durable medical equipment segment moved to its highest level in January, 19% since the launch of the brand. As pulmonologists begin to see more moderate to severe COPD patients again and refocus their practice, Upelri is positioned to provide benefit to patients who require the medicine, whether it's through increased hospital admissions or office visits. Second, will deliver on key inflection points for programs that have been a major focus of the company. Amproloxatine, a wholly-owned transformational product in rare disease and symptomatic NOH, with Phase III data in Study 169. Delivering on the promise of unique organ-selective medicine for IBD, complemented by a partnership with a market leader, Janssen, for Isoncetinib and ulcerative colitis, And the immediate future, phase two data on Nezalcetinib, an inhaled novel JAK inhibitor targeted at stopping pulmonary hyperinflation of the lung. And third, Trilogy, driven by the launch of asthma, continues to grow, providing a source of capital for our business. Given the importance of the development pipeline delivering on the key data readouts throughout the remainder of 2021, I'll turn the call over to Rick Graham, Senior Vice President of Development. Rick will begin by highlighting the key timelines and reasons why TVPH is excited about the readouts. Following Rick, Frank will review the UPelry first quarter commercial results. And finally, Andrew will review our financial results and guidance. Rick.

Thanks, Rick. It's exciting to be part of the quarterly update, especially during such a transformational year for the company. While this was my first time presenting in the quarterly call, I've been part of the TheraVans Biopharma team since October 2015, helping the company execute across research and translational science, development, and commercial, and I've had the opportunity to lead the Amproloxatine and Isoncitinib project teams. Scientific excellence and focus on insight and innovation make TheraVans Biopharma a special company. I believe it's because of this difference, amongst others, that we've been able to recruit top talent into our development organization over the last 18 months. including Dr. Chin Lee, who recently joined our company as Vice President, Head of Clinical Science, and Chief Medical Officer. Chin brings extensive drug development experience, having previously been at Genentech, Lilly, and Abbott. His prior success in leading novel therapeutic programs across a variety of therapeutic areas will be valuable as we seek to advance our pipelines. Chin obtained his medical degree from the University of North Carolina at Chapel Hill and also has a Master of Public Health from Northwestern University. We're delighted to have Chin join the TheraVans Biopharma team. Moving to the pipeline, let's first discuss Nezalcitinib on slide seven, our nebulized lung-selective PanJack inhibitor. We first talked about Nezalcitinib during our R&D day back in 2018 when we were studying it for the treatment and prevention of lung transplant rejection. Then last year, in response to the pandemic, we deliberately chose to expand the clinical development program to begin studying Nezalcidinib as a potential therapy for acute hyperinflammation of the lung as a result of COVID-19. As the pandemic continues to surge in certain communities and parts of the world, treatments are needed for hospitalized patients. Moving to slide eight. Theravance Biopharma is developing Nezalcitinib to inhibit the pulmonary inflammatory cascade triggered in response to viral infection. As a JAK inhibitor, Nezalcitinib intervenes broadly to interrupt immune activation and restore balance. By nature of being an inhaled lung selective treatment, Nezalcitinib is designed to deliver a therapeutic dose directly to the lung through nebulization with minimal exposure to the bloodstream and other organs. We believe that achieving this immune homeostasis is critical to preventing cytokine release syndrome that has been shown to cause acute lung injury, ventilator use, and increase morbidity and mortality in COVID-19 patients. On slide nine, we highlight several important observations from our preclinical work with Nezalcitinib that suggests it may provide a unique therapeutic benefit through three distinct activities. Starting on the left panel, Nezalcitinib is a potent PANJAC inhibitor. The middle panel shows that Nezalcitinib may protect against virus-induced cell death. And the far right panel demonstrates prevention of cell entry, limiting virus dissemination in the lung by potent inhibition of the endogenous machinery for SARS-CoV-2 infection. Our goal is for Nezalcitinib to be the first inhaled treatment to broadly interrupt viral-induced activation and restore immune balance in the lung. We have now fully enrolled a 200-patient phase 2 study in hospitalized COVID-19 patients and plan to release the top-line results later in the second quarter. Now let's move to Isoncitinib on slide 10, our oral gut-selective PANJAC inhibitor to treat inflammatory bowel diseases, which is partnered with Janssen. On the next two slides, I'd like to paint a picture for you that should really underscore the value of the organ-selective approach in IBD. the goal of which is to maximize therapeutic benefit to patients while minimizing side effects. We do this by keeping two key design principles at the forefront. First, targeting validated disease biology, and second, designing isentitinib's novel chemistry to unload active drug directly to the site of action in the gut. For IBD, the biology we are targeting is the JAK pathway. We posit that potent inhibition across all JAK isoforms, that is JAK1, JAK2, JAK3, and TIK2, within the GI tract is the key to maximizing the therapeutic benefit while minimizing the risk of systemic immunosuppression. We believe a gut-selective JAK inhibitor like Isoncitinib has the potential to be a game changer for the treatment of IBD and then it may become a once-daily oral treatment amenable to earlier lines of therapy as well as combination approaches. On slide 11, I'll highlight a few important data points from our preclinical work and support the gut selectivity of isancitinib. As shown on the left panel, isancitinib exhibits high margins of systemic safety in nonclinical studies relative to a systemic JAK inhibitor, which has little to no safety margins. On the right panel, you'll note that systemic exposure of isoncitinib is low in patients with ulcerative colitis, which aligns with the high safety margins in animal studies. Notably, the oral bioavailability of isoncitinib is only 2%. That compared to other systemic JAK inhibitors, which was designed to distribute throughout the body and are therefore highly bioavailable. Importantly, gut selectivity confers low systemic exposure and offers the potential for an improved side effect profile compared to systemically distributed JAKs. On slide 12, I'll focus on optimization of benefit or efficacy with a gut selective approach. On the left panel, we have demonstrated a lack of T cell infiltration into the lamina propria. That's the site of action for JAK inhibition via nanostring technology in a mouse model of IBD. This result suggests that Isoncitinib blocks inflammation and penetrates deep within the colonic tissue. As shown on the right panel, this deep tissue penetration at the site of action in the mouse model translated into clinical activity in the sensitive endpoints of rectal bleeding and endoscopic improvements after only four weeks of treatment in patients with ulcerative colitis. These data, which were published in the Journal of Crohn's and Colitis, provide confidence in the biologic activity of isensitinib and its potential to treat IBD by maximizing drug concentration where it matters. at the site of action in the GI tract. We expect the top line results from the phase two B ulcerative colitis study in the third quarter and top line results from the phase two Crohn's study in late fourth quarter to early first quarter 2022. Now let's transition to ampryloxetine on slide 13. Importantly, we're on track to report top line phase three results in quarter three for ampryloxetine, a once daily norepinephrine reuptake inhibitor to treat symptomatic neurogenic orthostatic hypotension. As slide 14 notes, we're working to break new ground as there's a significant unmet medical need for the treatment of symptomatic NOH. This condition profoundly impacts the quality of life that occurs in people suffering from Parkinson's disease, multiple systems atrophy, and pure autonomic failure. Symptoms in these patients include dizziness or lightheadedness, fatigue, difficulty walking, and weakness. This results in a high impact on quality of life, high risk of injury from falls, and a significant burden to caregivers for these patients. This condition can lead to depression, social isolation, bone fractures and head trauma due to falls, and overall morbidity. Slide 15 depicts how ampryloxetine may target and correct the impaired vasoconstriction due to dysfunction of the autonomic nervous system in people that are living with symptomatic NOH. The left panel shows that ampryloxetine inhibits the reuptake of endogenous norepinephrine, which leads to an increase in levels at the axon terminal of patients that are still producing norepinephrine, which results in an increase in blood pressure. With a distinct mechanism of action, ampryloxetine has the potential to be differentiated from current treatment options in the areas of durability of effect, once daily dosing, and a reduced risk of supine hypertension. It's our goal for ampyloxetine to be the first treatment to demonstrate a sustained impact for patients managing the chronic and debilitating symptoms of NOH. We look forward to sharing results from the first of two pivotal studies in the third quarter. Next, let's move to slide 16, and Frank will speak to the commercial team's progress with upelry. Frank?

Thanks, Rick. Turning to slide 17, remember, upelry is indicated for the maintenance treatment of patients with COPD. It's the first and only once-daily nebulized, long-acting muscarinic antagonist that provides a full 24 hours of control for patients. In the second full year since its launch, Upelri continued to experience solid net sales growth on an annual basis in 2020, which is a trend we expect to continue in 2021 and beyond, given the significant patient opportunity for Upelri. TheraVans Biopharma and Beatrice co-promote in the U.S. with our combined sales infrastructure targeting healthcare professionals who treat COPD patients suitable for you, Calgary. As a reminder, TheraVans Biopharma commercial and medical field teams cover the hospital segment for COPD patients, and Beatrice covers the community pulmonologists. Also remember the Beatrice Theravance Biopharma Commercial Partnership is a 65-35 profit and loss split, so this only shows our implied 35% of the upelry sales. On slide 18, we present Theravance Biopharma's implied 35% share of net sales for upelry during quarter one of 2021, $12.9 million in revenue in quarter one. Turning to slide 19, we continue to gain share in both the hospital and the community settings. Many patients with COPD experience an acute episode serious enough to require a trip to the hospital for immediate care. The hospital then becomes a key point to assess and to switch a person with COPD from their current medicine to upelry. Data shows that many patients who receive upelri in the hospital are discharged with a prescription to continue treatment, allowing for continuity of upelri therapy for patients post-discharge. The Beatrice and Theravance biopharma teams continue to work effectively at converting business from competitive products to upelri during the hospital to outpatient experience. Notwithstanding the unprecedented nature of 2020, the product continues to effectively manage pandemic-associated headwinds. While Upelry picked up momentum throughout the quarter, quarter one 2021 net sales were flat compared to quarter one 2020 and were down 5% from quarter four 2020. In January and February of this year, Salesforce and HCP interactions remained difficult, which affected our ability to get in front of COPD medicine prescribers. However, the environment improved in March, and demand for upelry was up 28% over February. In-person details grew 65% over baseline in March. We've also been encouraged with prescription activity through late April. Both new to brand Rx's and total Rx's have continued the upward growth that was reignited in the late first quarter. In addition, hospitals continue to add upelry to formularies and new accounts are being added weekly. You can see this upward growth on slide 20 progressing beyond the end of quarter one. We continue to track the key performance metrics since launch, and these are quarter one 2021 metrics. A total of 719 formulary and non-formulary hospital accounts have ordered upelry, and 67% of these accounts have ordered upelry at least twice. Quarter one 2021 formulary wins total 11. representing 38 total accounts, which equate to 440 formulary accounts launched to date, a formulary win rate of 91%. 85% of these formulary accounts purchased to date, owing to a lag between formulary approval and ordering commencing. Our MedAffairs team continues to provide timely information to HCPs based on inbound requests, and requests for formulary presentations. In fact, the medical science liaison's formulary support for presentations in quarter one 2021 was the highest since quarter one of 2019 when the brand launched. At the end of quarter one, Upelri's commercial coverage was 74%. Looking ahead, it's important to understand that according to the gold guidelines, ALAMA is foundational to COPD maintenance care for appropriate patient types. The execution of our tactical plan will continue to leverage the guidelines and appropriate patient types while we continue to optimize the marketing mix through rigorous and continued measurement of tactics. So now I'll turn the call over to Andrew to review the financials.

Thanks, Frank. And before moving to Theravance Biopharma's financials, let's start on slide 22 with an update on GSK's Trilogy. As a reminder, Trilogy is the first and only once daily single inhaler triple combination therapy approved for the treatment of COPD and asthma. Theravance Biopharma is entitled to receive upward tiering royalties on global net sales of Trilogy through our economic interest in TRC LLC. At present, 75% of the income from our economic interest is pledged to service interest and principal payments on our outstanding 2035 non-recourse notes, and the remaining 25% of income is retained by us. In January 2021, we received $21.3 million from TRC LLC, and in April 2021, we received an additional $20.2 million. During GSK's first quarter earnings call, they noted that Trilogy continued to lead the market as a single inhaler triple therapy in Q1 or with Q1 2021 sales growth of 37% over Q1 2020, generating global net sales of $341 million during Q1 2021. Moving to slide 23, Here we provide Theravance Biopharma's first quarter 2021 financial highlights compared to the first quarter of 2020. R&D expenses for the first quarter of 2021 were 67.6 million compared to 66 million in the same period in 2020. SG&A expenses for the first quarter were 30.6 million compared to 26.3 million in the same period in 2020. Regarding financial guidance for the full year 2021, we are reiterating previously issued guidance. For R&D excluding share-based compensation, we expect to invest between 195 to 225 million relative to an actual R&D investment of 230 million in 2020. For SG&A, excluding share-based compensation, we provided a range of 80 to 90 million relative to an actual SG&A expense of 77 million in 2020. As we noted on our previous quarterly call, when we issued the 2021 guidance, we expected greater spending during the first half of 2021 compared to the balance of the year, driven largely by annual incentive compensation expenses that occurred in the first quarter. And with that, I'll turn the call back to Rick for closing remarks.

Thanks, Andrew. As we bring the Q1 update to a close, I will share once again our 2021 milestones and value-driving catalyst for what we plan to be a transformational year. The scale and breadth of our development programs are developing, are beginning to deliver results, and we're eager to see our science come to fruition. While we're excited about the science, we're most enthusiastic about what it can potentially mean for people who need the medicines most, whether it's preventing the person hospitalized with COVID from entering the ICU and disease progression, or an MSA or Parkinson's patient and their family managing NOH, experiencing fewer falls, or a young adult trying to live a normal life while navigating the daily pains and challenges of ulcerative colitis or Crohn's disease. We look forward to the day the TheraVents Biopharma Development Organization can pass the baton to our commercial team who can make a difference in these communities as they made a difference in the COPD community with experience, compassion, and improved treatments that provide a better quality of life. As a reminder, our near-term catalysts are nasal cetinib, phase two top-line results in this second quarter, two critical data readouts in Q3 of 2021, ampryloxine phase three, and Isoncetinib Phase IIb for ulcerative colitis, and Phase II Crohn's disease in late Q4, early Q1. I'll now hand the call back to the operator for questions.

Thank you, sir. Once again, if you would like to ask a question, you may do so by pressing the star key followed by the digit 1 on your touchtone phone. If listening via webcast, please mute audio on your webcast device before asking a question over the phone. If you are using a speakerphone for today's call, please make sure your mute function is turned off to allow your signal to reach our equipment. Again, that's star one if you'd like to ask the question. And we'll pause for a moment to assemble our roster. We'll have our first question from Lisa Baker with Evercore ISI. Your line is now open.

Hi, thanks for taking the question. Can you maybe comment and give us some color on sort of why the trial is being a little slow to enroll in the Crohn's as opposed to the ulcerative colitis study?

Yeah, it's a good question. I think Crohn's traditionally is, you know, look across the industry, it's been a little bit slower to enroll generally regardless of the development program. I think second, that once you have patients that are on a successful medicine and they begin to get treatment, particularly in the period of COVID, they've been slower to switch off. And with that, I'll turn it over to Rick for some additional comments.

Yeah, thanks, Rick, and thanks for the question. You know, just a couple of things to add. With enrollment complete now for Nezalcitinib and Isoncitinib for ulcerative colitis in the 2B study and nearly complete for Amproloxacin, we've shifted resources over the Crohn's study so that we can further enhance our engagement with clinical trial sites. So we do see the light at the end of the tunnel and we'll deliver the Crohn's data as expeditiously as possible.

Okay. Okay. And from Janssen's perspective, are they waiting to see data from both studies before kind of making that option decision, or will it be based on just one? Do you have any sense of how they're thinking about it?

Yeah, so obviously, as I mentioned before, we're working with Janssen sort of day in, day out on this program. Great relationship. They followed the progress of the ulcerative colitis program thrilled about that approaching data. Relative to our responsibility under the agreement with Janssen, we need to deliver both Crohn's and ulcerative colitis data package to Janssen for the opt-in. And we need to work with them to minimize any delays that we might have in the program related to the little bit of a separation between the data and the ulcerative colitis, data between ulcerative colitis and Crohn's, because it's good to keep in mind that, of course, we're accruing right now to a phase three maintenance program in ulcerative colitis. And I'll have Rick touch on the plans, our regulatory plans, once we receive the ulcerative colitis data. Rick?

Yeah, sure. So when we received the phase two B data in ulcerative colitis in Q3, we will be planning to have into phase two meetings with both FDA and EMA. So at the end of that phase two study, we'll need to select a dose. There are three doses that are ongoing in that study to move forward into the phase three induction study.

Okay.

Okay. And then for ampulloxetine, can you maybe just review how you're thinking about the regulatory strategy. I know you're doing two studies, yet you kind of look at the field with NorthEra, and this is a much more robust program, even with just the one study, than really they did. And maybe you can tell us how you're thinking about kind of your next steps after this trial rates out. That's my last question. Thank you.

Rick, go ahead. Yeah, thanks for that question, too. So just a reminder to everybody about the program that you're referring to. We have Two pivotal trials. The first of those is called Sequoia. This is a four-week efficacy study, randomized placebo-controlled. Patients from Sequoia, at the end of that four-week treatment period, can roll into the next study, which is a durability study called Redwood. That's a 16-week open-label study. At the end of 16 weeks, there's a randomized withdrawal for another six weeks. So it is a very robust program. We worked closely with the FDA on the design of the study. And what our plan is currently is at the end of the Sequoia study and top line results in Q3 for that study, we will be having a conversation with the FDA. Depending on the results, our plan is to engage the FDA, especially around the area of breakthrough therapy designation. Now we do expect that we'll need to complete the Sequoia and the Redwood study as part of the filing package, but with breakthrough therapy designation, there are benefits with regard to an enhanced or expedited NDA review, and we'll be exploring those with the FDA.

Okay, great. We're excited for all these upcoming catalysts, so thank you for the questions.

Thank you. Our next question comes from Mark Flom with Cowen. Your line is now open.

Hey, thanks for taking my question and, you know, the granularity you're able to give on upelry. The market share and the formulary did it. It certainly seems impressive. What do you think needs to happen to the kind of broader nebulized market to kind of allow those metrics to really start translating into greater sales growth? And, you know, obviously that will have tremendous impact to the bottom line for you guys.

Yeah, I think, well, number one, I think the abatement of COVID such that we actually have pulmonologists available and COPD patients, which obviously are a fragile population to begin with, to begin, you know, seeking improved therapy versus what they've previously been on, that is going to be a significant change because I think any external metric that you look at with regard to the number of either office visits or the number of uh, pulmonology, uh, new, new starts by pulmonologists outside of COVID have been almost, uh, nil. It's one of the most impacted specialties. Uh, I think so. Number one, getting, getting out of COVID and being able for our reps to go continue to detail pulmonologists. Uh, as Frank said, we've been, uh, very successful in continuing to rack up formulary approvals and those formulary approvals just need to roll through to, uh, to ordering, which Frank touched on, and now I'll let him take it from there.

Yeah, no, Rick, you touched on a lot of the things that really matter. I mean, the primary driver of the results was really the surge in infections, particularly in late 2020 and bleeding into 2021 in many parts of the country. This was really a double-edged sword for you, Pelry, because our target audience, pulmonologists, were occupied treating patients with respiratory problems Also, a lot of institutions and hospitals restricted access for our people. And due to that, quite frankly, both companies kept people home, safely at home for quite some time during late 2020 and also 2021. We did see sort of a re-ignition toward the end of first quarter that we were very pleased with. It coincided with other market factors that we thought were going to contribute to growth of Bupelri. Just starting off with April, the early prescription data we've seen from April shows new-to-brand RXs and total RXs are growing nicely. We've now had a chance to evaluate all of our non-personal promotion and digital assets that we put in place during the pandemic. We've taken a look at those. We've refined, made improvements in the investment portfolio, the weighting of each of those and the prioritization. Since we have, we know a lot more about the return on investment for those. I would also add, you know, we have both companies full complement of sales representatives back in the field for face-to-face interactions. And this is important for obvious reasons, but it's also important because our promotional effectiveness is significantly higher when we're in person in front of a customer. And we also know that our in-person details as a percent of total details continue to increase on a weekly basis. And I guess I would also add that we increased share throughout the pandemic in 2020. So we view all of this as leverage points compared to the pandemic period, which allows us to feel pretty positive about the balance of 2021 and beyond.

I think just to close out, Mark, we've talked about it before, but we obviously think that patients with low peak inspiratory flow or a specific patient population with COPD that can benefit disproportionately actually from upelry as evidenced by some earlier clinical work that we've done. And we'll be getting another clinical study underway uh, this year with regard to, uh, uh, you know, expect effectively, uh, expanding the market into a more low peak inspiratory flow patients.

Okay, great. That's helpful. And then maybe this for more for Andrew or maybe Rick, um, can you give some more granularity on the financial guidance and kind of how you expect some of the spending to evolve kind of in the back half of the year as, um, some of these later stage trials kind of start reading out. I guess, should we expect spending to kind of drop significantly as those readouts happen, or because of these rollover studies, should we kind of be expecting as we head into 2022 to spend the R&D expenses to stay kind of similar?

Go ahead, Andrew. Well, I think we're not going to give more quantitative granularity, Mark, beyond what we've just given and reaffirmed for the full year. But qualitatively, yes, your points are well taken that the composition spend, especially with some of the key studies in ampyloxetine, isensitinib, and nezalcinib, completing at least the currently designed portions of those development programs, yes, there will be lower spend going into the remainder of the year. And those are the key drivers, the development spending, because the SG&A spend is going to remain pretty much steady as it goes over the remainder of the year. So I hope that gives some granularity. The other important thing to keep in mind is that the cash flow generating parts of the business, both upelry and trilogy, we see continued growth and project that to increase throughout the remainder of the year, those sources of cash. So this is what we've referred to as sort of the changing financial complexion of our business, which is picking up speed in 2021. And we expect to continue going into next year and beyond. Okay, thank you.

Thank you. Our next question comes from Jeffrey Porges with SVB Link. Your line is now open.

Thank you very much. First of all, to follow up on the cash question, it sounds as though you are planning, if not initiating, a further trial in ulcerative colitis before you get the Crohn's data and the J&J opt-in. Is that a correct interpretation of your comments or not? is it that you won't start that ulcerative colitis trial until the first part of next year when you get the Crohn's data? The first question.

Yeah, Jeff, let me just take that quickly. No, the maintenance, the phase three maintenance study has been ongoing since we initiated the phase two B portion. We had negotiated with regulators in both the US and Europe given the 1B data, the nature of the 2B data of, in fact, rolling patients and getting a jumpstart effectively on the Phase 3 program of rolling those 2B patients into a maintenance study. And again, that's been ongoing since we started the Phase 2B program.

Okay. All right. So is that... maintenance study going to be sufficient for approval, or do you need to do an additional pivotal trial in ulcerative colitis?

We'll need to add to the number of patients on maintenance, which will come from an additional induction, Phase III induction study that will start with the agreed-upon dose with the regulators post the data. Rick?

Yeah. And just a reminder to everybody, this is all rolled together in one seamless phase 2B3 protocol. So it's a very complicated protocol, but it's got the 2B portion. Those patients roll into the maintenance study that Rick's talking about. And then at the end of 2B, there's another phase 3 induction study that also rolls into that same maintenance study. So this is all part of the same protocol.

Okay. So I just want to follow up. So then will costs go down in the back half of the year, or will they be maintained for that program because of that transition?

Well, the cost will – sorry, Andrew, go ahead.

Well, they'll go down – the total spending operating expense will go down from Q1 to Q2 into Q3 and Q4, but we're not giving quantitative guidance there. That's just a directional spend. But, Jeff, for the full year range, this does include the continued – we assume that we will continue to execute the Phase 2B and the Phase 3 portion, the maintenance portion of the ISINCID and the UC program throughout the year and into next per protocol design.

Great. And then just a question on amproloxetine. Could you – We're just struggling with the revenue potential because the numbers you give are very large patient numbers, but then Northera really tapped out at sort of roughly in the range of $350 million in revenue. So could you kind of help us understand whether that's the right benchmark for the commercial potential of ampryloxetine, or if it's different in your view without getting a number from you, why might it be significantly different from where Northera reached? Thanks.

Yeah, I think the difference is sort of three or four fold between the two products. One, our objective with ampryloxetine as a treatment for NOH is commercially and the effect that we plan to have on patients is greater than where Northera was at peak sales. And the reason for that is one, you've got in ampryloxetine a product once a day with a very long half-life that should be able to stabilize those norepinephrine levels and therefore address dizziness with efficacy that we hope is better and certainly more durable than the norethera program. That the therapeutic index that we're able to achieve with ampryloxetine in patients with NOH is, in fact, greater than what can be achieved with norethera, and there will be less stopping and starting of norethera because of both the efficacy and the safety. You may know that norethera, many patients titrated to effect. We believe that with the long half-life of ampryloxetine, That titration, obviously, we don't have it planned, but it's a much simpler dosing regimen. And if the small phase two is an indicator and now publish the levels of norepinephrine increases that we see, we should be able, our plan is to, in fact, see that efficacy come through in the phase three program. And I'll let Rick comment further because he's quite close to it.

Well, I'll just add one thing that I think is a really important potential for differentiation. Troxidopa, it's a noradrenaline prodrug. So you're adding norepinephrine or noradrenaline straight into the body exogenously. Contrast that to ampryloxetine, which is a norepinephrine reuptake inhibitor. So what we're doing with ampryloxetine is using the body's own norepinephrine that's already there. Now, when patients with this condition stand up, that's generally when norepinephrine levels are at their highest. When they lay down, that's when norepinephrine levels are at their lowest. So again, in the supine hypertension concern with regard to black box warning, when you're adding endogenous noradrenaline into the system, there's a high likelihood for supine hypertension. When you're using the body's own norepinephrine, which is low at night, we believe there's a very low risk for supine hypertension. So that's going to be one of our key differentiators.

Terrific. Thank you very much.

Thank you. Our next question comes from Anupam Rama with J.P. Morgan. Your line is now open.

Hey, guys. Thanks so much for taking the question. I was just wanting to follow up on a prior question, which is how much site overlap is there between the UC and Crohn's disease studies for Isoncytinib? And maybe you could expand on when you say you're going to devote more resources now to the Crohn's disease study. What does that mean? And maybe if you can provide some color on that. Thanks so much.

Rick, you want to take that?

Sure. Yeah, there's some overlap, as you can imagine, because in order to enroll this trial of 160 or so patients, you need 100 or so sites because the number of patients that you get per site is relatively low. So there's some overlap, but it's not entirely on top of one another for UC and Crohn's. And then just to clarify my point about more resources, really what this requires to get over the finish line here is constant engagement with sites. I mean, there's patients with Crohn's, in order to be eligible for the trial, they need to be in an active flare. There's a lot of pre-screening activity that goes into this. And this is a labor-intensive enrollment process for these clinical trial sites. So what I mean by resources is just more people within the company actively engaging with our clinical trial sites, of which we have a lot. So we're just staying on top of that minute by minute, hour by hour to get over the finish line.

Thanks for taking our questions.

Thank you. Our next question comes from Douglas Sal with HC and Wainwright. Your line is now open.

Hi. Good afternoon. Thanks for taking the questions. Just in terms of UPelri, when we look at the sort of growth that we started to see sort of at the end of the first quarter, I'm just curious, is that coming from the existing sort of account base, those that already have it on formula, or is it coming from the addition of new hospitals to the sort of account base. And I'm just curious, you know, I think you said that there have been about 719 hospitals that have ordered. I'm just curious what the ultimate sort of end as far as the target universe of hospitals that you see as appropriate.

Sure. I'll take a couple of, make a couple of points and transition over to Frank. I mean, I think we could, we think we could, you know, we get well over a thousand hospitals and obviously our hospitals are, focused on those institutions that have disproportionate treatment of COPD patients. So it's a fairly targeted effort. I think what we've seen, particularly over the last four, five, six weeks, is we've seen increasing orders of from hospitals that are in our universe, which we track on a weekly basis. So, Frank, you want to?

Yeah, no, the answer is we're getting business from both. We're growing the base business, excuse me, as evidenced by the number of hospitals that already purchase, you've already purchasing frequently and now periodically. We also add to the number of accounts that purchase the salary on a weekly basis. And as a matter of fact, the last week for which we have data was the fourth highest week since we launched the brand. And the other three highest weeks were pre-pandemic. So we're getting business from the base of business and we're growing it on new accounts. As I mentioned in the remarks, there is a lag time once a hospital puts it on formulary there is a lag time while it gets into the electronic medical record system so that physicians can access it from the floors and pharmacies can send it up and things of that nature. So quite frankly, it's going just as we planned it.

Okay, great. Thank you very much.

Thank you. Our next question comes from Vikram Purohit with Morgan Stanley. Your line is now open.

Great, thanks for taking my question. I wanted to go back to Amproloxatine and just wanted to see if you could talk a little bit about what you think would be a clinically relevant outcome from the readout expected in the third quarter. And then I'll talk a little bit about how we should think about pricing potential given the different kinds of commercial dynamics that could be at play if Amproloxatine is successful and eventually approved.

Sure. I think the FDA has said that a one-point difference is a clinically meaningful difference in the OHS-A1 measurement scale. So, you know, that's clinically meaningful. We were able to see a little bit, we were able to see higher than that in the phase two study. But, Rick?

Yeah, that's exactly right. A one-point change in OHS-A1. So, this is the question that on the OHSA questionnaire that talks about, are you feeling dizzy? Are you feeling lightheaded? Do you feel like you're going to black out or pass out? But in addition, with this well-designed program, we're going to be looking at a lot of other quality of life instruments too. So we've got something that's called the orthostatic hypotension daily activity scale, a patient global impression scale. There are scales that are specific to MSA patients, scales that are specific to Parkinson's patients. In fact, we even have a wearable device in the study to monitor the patient's activity and mobility. So in addition to OHS-A1 with regard to the approval endpoint, we're going to be looking at a whole host of things that are going to really get at the quality of life of these patients.

And I think, you know, from the commercial side, You know, clearly, you know, you've got a spectrum of patients from multiple systems atrophy to to Parkinson's disease patients, a specific segment of those that that in fact suffer from suffer from. So you're going to have an overlap between commercial, some commercial pay, some Medicare, Medicare pay. We haven't gotten too deeply into talking about the pricing strategy, but that work currently is ongoing at the company, as is the segmentation of the market and where we need to go to get what patients. I don't know whether Frank wants to add anything to that or not.

Yeah, no, I was going to add, I mean, we do view ampryloxetine as potentially a highly differentiated product, given the suite of products that are available today. We are working, and quite frankly, have been working for quite some time on the medical strategy, the access strategy, and we'll have health economic and outcomes research data available when this thing potentially launches. So we plan to be very aggressive and just qualitatively speaking, we plan to price the product commensurate with how we see the differentiation.

Okay, got it. Thank you.

Thank you. Our next question comes from Brian Scorney with Baird. Your line is now open.

Good afternoon, everyone. Thank you for taking the question. A question maybe for Richard on just some thoughts around the trial designed for Sequoia and Redwood. I know in the phase two, there was a pretty substantial dropout rate over the first four weeks of treatment and then more through week 20. So I was just wondering if you can review anything in the protocol different between two and the phase three studies to sort of try to manage that dropout rate. And also, per the protocol design, how is the ITT analysis accounting for drop-offs in each of these studies, particularly in the 16-week lead-in and the withdrawal phase in Redwood? How do you kind of account for drop-outs there going into then the subsequent, like, formal withdrawal? Thanks.

Yeah, thanks, Brian, for the question. This question's come up a lot with regard to the Phase 2 study and the number of patients that we started with versus what we ended with. We're We're in the process of writing up a manuscript for that phase two study, so that will be coming out very soon and there will be more details to come. That study, however, was originally designed really just to look at the pressor effect of ampryloxetine. So it was a three-part study and part A was really just designed to look at blood pressure. We then moved into a randomized section that we called part B and the real meat of that study was part C, which was a 20-week study. Now, There were patients in that phase two study that were coming to dysautonomia center in New York, where it was being assessed from all parts of the United States and even one patient outside the United States. So patients with MSA over 20 weeks traveling to one center, it's going to be very difficult to maintain those on the study. So we see that as very different than the way that we've designed our phase three program. I can comment that With regard to discontinuation rate, we're pleased with Sequoia study, the four-week study, it's around 5%. And then for Redwood, our discontinuation rate has been around 33%. As you might remember, we've also decentralized this trial around the world to make it more patient-centric. So these patients now really don't need to go into the clinic except for their very first screening visit where they have their tilt table assessment. So we've, in effect, taken the clinical trial to the patient's home. With regard to the ITT analysis, we have completed our statistical analysis plan. We've shared that with the FDA. We've come to an agreement with the FDA. So I won't comment on the specifics of that, but we do have an SAP in place.

Thank you. Our next question comes from Joseph Stringer with Needham and Company. Your line is now open.

Hi, everyone. Thanks for taking our questions. Kind of a quick one on the J&J option here. This is my understanding that J&J had the option up to 90 days after the combined Phase II UC and Crohn's. So is that, you know, has anything changed now that Crohn's is now late 21, early 20? Would it still be up to 90 days essentially after the phase two Crohn's readout?

Yeah, the agreement has not changed. So that's, you know, we will, our plans are to deliver the data package on ulcerative colitis obviously as soon as we can to Janssen and then and then also be in a position to deliver that Crohn's data package as soon as we can. So, you know, we had planned for those two data sets to come together. It now looks like they're going to be separated, but we'll likely still deliver the UC as soon as we can, and then the Crohn's data package as soon as we can. It's a little bit of a misnomer, but, you know, in terms of delivery, because Janssen is extremely aware of exactly where we are with this program and, in fact, has worked with us to put together not only the designs of the studies, but also the analysis plan and the package. So all this is, you know, very transparent between the two companies. They understand where we are and what our plans are with regard to delivery, but Under the terms of the agreement, it's 90 days after the complete package, which includes Crohn's and ulcerative colitis.

Okay. Thanks for taking our question.

Yeah. Rick, did you want to add anything to that?

No, nothing to add, Rick.

Thank you. Our next question comes from Tazina Maud with Bank of America. Your line is now open. Hi, good afternoon.

Thanks so much for taking my question. For azacitinib or any of your JAK inhibitors, have you had any interactions with the agency that would indicate any kind of heightened concern? I'm asking obviously because the agency has in recent months been increasing their queries around the safety of the JAK class in general. Just wanted to get your thoughts of any of your interactions with them have changed. And then secondly, as it relates to commercial, I guess, opportunity for you, Pauly, how much is COVID kind of clouding what the true market opportunity could be here, and when would you expect to see a recovery? Thanks.

Yeah, I'll take the – COVID and UPelri and then kick it over to Rick to comment on the agency interactions that we've had. So, you know, I think Frank mentioned that there are two issues. One, pulmonologists have been quite, you know, busy, particularly in specific parts of the country dealing with COVID. And they are one of our, you know, key target customers for UPelri. So their access has been, you know, it's been a challenge However, we've still been able to add two formularies throughout the pandemic. Second point, as Frank mentioned, is that because of COVID, we've had delays in access into hospitals and offices for all the right reasons of our own employee safety as well as our customer safety issues. We expect and, in fact, have seen that change already for both sales forces, both the Vietra sales force as well as the Theravance Biopharma sales force through the month of March as different geographies have opened up. So I'll let Frank add to that answer, and then we'll go to Rick for the JAK inhibitor discussions.

That's essentially it, Rick. I mean, you can see what happened to our business, and it's highly correlated. to surges in infections in certain parts of the country, hospitals and institutions restricting access, pulmonologists and other pulmonary healthcare providers being preoccupied appropriately with treating COVID-19 patients. And as we've come out of that toward the back half of the first quarter, you've seen the business respond very positively. We've seen that continue into the month of April. and some of the other things that I've mentioned with respect to measuring our investments, reprioritizing those. We know a lot more about our non-personal promotion and our digital assets that we had to put in place. We now know that we have our sales force and Beatrice's sales force back out into the field. And we know that our promotional effectiveness is much higher during in-person customer visits. So hopefully, most of the pandemic effect is behind us, and we're looking forward to getting back in high gear as the year unfolds.

Okay, Frank, thanks for that, Kaler. And just to clarify, when the reopening does accelerate, should we expect to see a steep uptake of new patients with upelry, or would that be more gradual? I'm just trying to figure out how much of this is is limitations directly from COVID versus doctors needing to still be educated. Thanks.

Yeah, no, honestly, I think that's a very good question. And companies besides Beatrice and Theravance Biopharma are really trying to figure out the extent of the answer to that question. As I said, we're very encouraged by what we've seen. I will remind you, we grew share through the pandemic. Um, and, uh, we're looking forward to executing flawlessly in the back half of this year.

So Rick, you want to take the eyes and eyes and set in there, but nasal set in there.

Yeah, sure. I'm happy to do that. And, and, um, we have not had any specific outreach from FDA or any health authorities related to, uh, eyes and sit in there or nasal sit in there with regard to some of the emerging information on systemic Jack inhibitors. And in fact, You know, back in 2014, this is exactly why we decided to develop a gut-selective JAK inhibitor in the first place. Maximize efficacy, minimize systemic immunosuppression. So this is, there are a couple of slides in the deck that we included today, slides 11 and 12, really to highlight that we've generated and published a compelling body of work so far that demonstrates the gut selectivity of Isoncitinib. Low-dose efficacy in animal models, very high safety margins in toxicology studies, low systemic exposure in healthy volunteers and patients with ulcerative colitis, no impact on lipids or other known JAK safety liabilities to date, and low oral bioavailability, only 2% when we give an IV dose compared to an oral dose. So at this point, again, nothing specific from health authorities, and we're happy with the position we're in, and we believe it's time to seize upon that opportunity to get a safer therapy to patients with IBD.

Okay. Thanks very much. Thank you. Our next question comes from Jeffrey Porges with SBB Link. Your line is now open.

Thank you very much for letting me jump on with another question. I couldn't let the call go by without asking about 0903. I hesitate to say that the lack of other questions is consistent with low expectations for the trial, but could you remind us what's really needed to show clinically meaningful effectiveness? Do you have to show a mortality benefit or a hospital day benefit? I know there are a variety of endpoints, but what's going to determine whether this is really an important breakthrough for treating advanced COVID patients? Thanks.

Sure. Rick, do you want to touch on that?

Yeah. So, you know, such an evolving field over the past 12-plus months. But what has become pretty clear is the endpoints around these trials are relatively standardized now. So in part two of our phase two study, the primary endpoint is pretty simple. It's the number of respiratory free days from randomization through day 28. So respiratory, this is respiratory failure free days, and that's defined as a day that a subject is alive and not requiring the use of invasive mechanical ventilation or non-invasive positive pressure ventilation, or high-flow oxygen device. So a relatively straightforward endpoint.

Obviously, Jeff, I mean, mortality is important, but I think the agencies around the world are looking at mortality as well, but they're also, the more data that comes out, Clearly, morbidity due to this disease is going to take an ever more important sort of segment of thought. And I think that's what one of the aspects of 903 that we're quite excited about is not simply having an effect on mortality, but being able to have an effect on the morbidity of the disease by some of the data that Rick actually presented on the slides today. Okay.

Thank you very much.

Thank you. It appears we have no further questions on the phone. I'd now like to turn the conference back over to Mr. Winningham. Please go ahead, sir.

Thanks everyone for joining us today. We've got a very exciting remainder of 2021 in front of the company. We look forward to executing and bringing you up to date on the exciting events that we have in store for the rest of the year. Thanks for your time.

This concludes today's conference call. We thank you for your participation.