Aerie Pharmaceuticals, Inc. (NASDAQ:AERI) Q3 2020 Earnings Conference Call October 5, 2020 4:50 PM ET

Company Participants

Ami Bavishi – Director of Investor Relations

Vicente Anido – Chairman & Chief Executive Officer

Tom Mitro – President & Chief Operating Officer

Rich Rubino – Chief Financial Officer

Conference Call Participants

Ken Cacciatore – Cowen & Company

Serge Belanger – Needham & Company

Dana Flanders – Guggenheim Securities

Greg Fraser – Truist Securities

Louise Chen – Cantor Fitzgerald

Dan Clark – Mizuho Securities

Disclaimer: *NEW* We are providing this transcript version in a raw, machine-assisted format and it is unaudited. Please reference the audio for any questions on the content. A standard transcript will be available later on the site per our normal procedure. Please enjoy this timely version in the interim.

Operator

[00:00:03] Thank you for standing by and welcome to the Aerie Pharmaceutical’s third quarter 2020 earnings conference call. At this time, all participants are in listen only mode. Later, be able to conduct a question and answer session and instructions will follow at that time. This conference call recorded it is now my pleasure to turn over to Ericsson Director of Investor Relations, Ami.

Ami Bavishi

[00:00:34] Thank you, Jerome. Good afternoon and thank you for joining us. With us today are Vincent Itoh, chairman and chief executive officer. Tom Migiro, president and chief operating officer. Rick Trevino is chief financial officer. David Hollander is chief research and development officer. And John Larrakeyah, general counsel. Today’s call is also being webcast live on our website. Investors, that area, pharma dot com, and it will be available for replay, as indicated in our press release. Now for forward looking statements and nongay financial measures. On this call, we will make certain forward looking statements, including statements, forecasts and observations regarding our future financial and operating performance impacts of the covid-19 pandemic and our observations regarding ongoing operating expenses and net revenue per bottle. These statements will include observations associated with our commercialization of repressed Androcles in the United States. They will also include plans and expectations regarding the success, timing and cost of our clinical trials. Additionally, we will discuss progress regarding maintaining, requesting or obtaining approvals from regulatory agencies of our products and product candidates, including our strategies and plans with respect to international expansion and associated collaborations. Finally, we will address our manufacturing activities and capabilities, our financial liquidity and other statements related to future events. These statements are based on the beliefs and expectations of management. As of today, our actual results may differ materially from our expectations. Investors should read carefully the risks and uncertainties described in today’s press release, as well as the risk factors included in our filings with the FCC. We assume no obligation to revise or update forward looking statements whether as a result of new information, future events or otherwise. Please note that we expect a follow through tomorrow. In addition, during this call we will be discussing an adjusted or non-cash financial measures for additional disclosures relating to these non-cash financial measures, including a reconciliation to the most directly comparable gap measures. Please see today’s press release, which is posted on the investor relations section of our website. With that, I will turn the call over to this.

Vicente Anido

[00:02:33] Thanks for me and good afternoon, everybody. Thanks for joining us. I realize that there’s an awful lot of activity today and certainly the external environment has been very fluid and challenging for everybody. I got a franchise showed a very positive momentum in Q3 with unit sales in the wholesalers increasing to two hundred sixty one thousand units in the third quarter, up over 12 percent from the two hundred thirty two thousand units in the second quarter. Ahsha timber year to date, net revenues of nearly 60 million, up about 30 percent over the prior year.

[00:03:05] And our volumes certainly helped a significant gains in our coverage this year, along with increased awareness of our product profiles, the net revenues of over 20 million for the third quarter increased around 12 percent, compared to the 18 million in the second quarter. And further penetrating our formulary contracts, aided by what we estimate to be approximately eighty five percent of physicians offices being opened in Q3, compared to only about seventy five percent in the second quarter or Q2 during our Q2 earnings call. We call that an expectation regarding future stability in our net revenue per bottles. In fact, our third quarter net revenue per bottle of seventy seven dollars per bottle was only a dollar off from the second quarter number, even though our Medicare Part D share increase from the second quarter by another two percentage points. And so, again, it’s just a reminder Medicare Part D is where we give out our biggest rebates. And so the fact that we increased Medicare Part D coverage by two points relative to our overall mix, our dollars are our for a bottle only drop by a dollar. So we think that that’s pretty darn good performance on a contracting side. As we discussed previously, our strategy to increase the net revenue per bottle over time includes renegotiating wholesaler agreements and refining some of our managed care formulary contracts, both of which are ongoing, along with taking price increases as we deem reasonable. But I have to do now is turn the call over to Tom Mesereau to cover is US commercial update on our glaucoma franchise before I cover other important highlights for the quarter Tom.

Tom Mitro

[00:04:51] Well, thank you, Vince. Our franchise of Repressor in Rockhampton continues to outperform the glaucoma market and all other branded glaucoma products. Our year to date through September, franchised prescriptions are up fifty five percent, while the glaucoma market was down two percent in the third quarter. Our franchise prescription volumes were up thirty two percent or thirty seven thousand prescriptions compared to the same three months of last year, while the glaucoma market was actually down four percent or three hundred and forty two thousand prescriptions. In September, we set new records for both total prescriptions and sales out units, which reached ninety thousand units from wholesalers in the pharmacies. In fact, looking back over the last eight weeks, our sales out of averaged over twenty one thousand units per week, which demonstrates excellent progress. The success we’re having has been driven by a number of factors. For example, looking at our recent data from our awareness trial and usage or 80 study, we found the top reasons for prescribing repressor include efficacy and its unique Amoa, which explains the reason why it is so effective as an objective agent. The top reason for prescribing Rolton is efficacy. The survey also indicated that physicians are becoming increasingly aware of, number one, their very positive data for Repressor from our Phase four study, which we called the most trial, as well as number two, our new formulary coverage levels for both work and rockbottom. As an example of that, we recently announced that we signed a major contract with one of the largest Medicare Part D plans in the nation that made both Repressor and Rocketdyne available on their formulary effective May 1st of this year. Now, since that time, our market share in that plan has grown by nearly 60 percent, which is strong evidence of our potoroo capabilities upon gaining formulary coverage for our products.

[00:06:45] As a third reason, I’ll mention is that our field force has been rapidly increasing the number of Face-To-Face calls they’re making with physicians. Well, there’s still some preference for virtual caused by a small minority of physicians, the overwhelming majority of physicians want to meet and speak with our representatives in person, and many are willing and able to attend our educational dinner programs as well. In fact, in October, our field force ran more educational speaker meetings than any month prior to that, which is a great indicator of physician interest in our products and prescriber data. Our base of weekly and monthly prescribers continues to grow. We currently have 4500 weekly prescribers and nine thousand monthly prescribers, with over sixteen thousand five hundred Icare professionals. Having written at least one script since inception, over ninety nine percent of our nine and 10 physicians, the highest prescribers of glaucoma medications, have written the script for either Repressor or Rockhampton, and these highest Dessau prescribers average over 30 prescriptions for our products per month. That was a reminder our every sales team is now calling on the ten thousand four hundred highest prescribers of glaucoma products. On top of that, in July, we added a sales force, or CSO, to call in the next one thousand four hundred highest prescribers. Also in May, we had an Italian sales team to call in the next four thousand four hundred highest prescribers.

[00:08:12] We believe that this approach represents an efficient way to gain access with as many physicians as possible, and the early data point to positive gains from these additions to our sales strategy. For example, our telesales team has increased the new our share and its particular audience by 15 percent from its pre promotion baseline month of April. Our CSO team has also generated success. The New York share and its particular audience has increased twenty four percent from its pre promotion baseline month of June, and our area sales force has continued to gain share. Our new market share, and it’s called an audience, has increased 13 percent in February when we started what we call our strategy, which resulted in increased frequency of calls on the highest prescribing physician. So in summary, and before I turn the call back over to Vince, we’re certainly regaining and surpassing the momentum we established prior to Koven. Our glaucoma products are clearly capturing the imaginations and prescriptions of many Icare practitioners with our excellent managed care coverage, a strategy to move monthly prescribers to weekly prescribers, our additional Sugarbush initiatives and of course, doctors offices are seeing our reps and more patients. I believe we are poised for continued growth. Vince, back to you.

Vicente Anido

[00:09:30] Thanks, Tom. Just as we’ve been growing our glaucoma franchise quite strongly in the United States, we continue to make significant progress in executing our international strategy. Just last week, we announced our license agreement with Samten Market leader for prescription ophthalmic pharmaceuticals in Japan with the presence in over 60 countries. Obviously, we’re all very excited about this relationship and look forward to many years of successful collaboration with the Zanten team to ultimately commercialize and not only Japan, but also South Korea, Indonesia, Malaysia, Philippines, Singapore, Thailand, Vietnam and Taiwan. Again, they’re very, very strong in a number of countries. And we certainly and in Japan, they’re clearly number one in the majority of the ophthalmic categories. As you saw in the announcement, Santa will pay an up front about 50 million dollars each, which will take place within 30 days of signing. And we’re eligible to earn up to ninety nine million in clinical, regulatory and commercial milestones. Upon commercialization, Arie will receive royalties in excess of twenty five percent, consisting of cost of product supplied to Sandton, plus an intellectual property component. Stanton will be responsible for sales, marketing and pricing decisions related to the licensed product, refresh and rockbottom. They’re also responsible for all the development and commercialization costs and activities related to the products, except that we will fund half of the cost of the first Phase three trial for Repressor in Japan, which is expected to commence by the end of this calendar year. As we mentioned previously, we had a virtual meeting with the PM Day and the equivalent of FDA in Japan. It was done in April and have excellent clarity on our path forward there. We expect to have three phase three trials to it, which will be twenty eight day trials and one will be a 12 month safety trial. We will, as I mentioned, Cofan, the first of the twenty eight day trials. It’s obviously a strong performance by not only our Japan team. They did a great job in putting all this together in affronting all of our discussions with the PENDA, but also our global team made up of regulatory and Kiwa folks, et cetera, that has led to this kind of performance once we move forward. From the Japan team, and they get this completed, the first of the phase three trials, we will obviously move them more into the dry programs as it relates to Japan for our international expansion.

[00:12:09] Opportunity extends beyond Japan and some of the other Asian countries covered under the santtana agreement, just like when we announced the phase to be trial in Japan. And all of a sudden the Japanese companies start calling and wanting to look at partnership opportunities. A recent successful three month interim topline readout of the six month Mercury three trial shows the potential of our growth hormone franchise in Europe. What’s surprising is in Europe there are one hundred and five million glaucoma bottles are filled in the top five nations in Europe alone in twenty nineteen. That’s compared to fifty five million bottles in the US. So they do use glaucoma products pretty extensively over there for Rockhampton, known as Rockland in Europe, to perform so well compared to the most commercially successful glaucoma product in Europe is a major accomplishment. As you know, from in our mercury free press release, Rocketdyne are required to perform even better in mercury free than it had in the US trials, averaging nine and a half millimeters of mercury and pressure reduction and achieving non inferiority to gain forth when comparing the efficacy of the two products. Importantly, we believe Rocklands has a safety advantages. Rochlin, unlike Danford in other PGA combination products in Europe, does not contain a beta blocker. So we believe the rock band has taken on its own, eliminates the heart and lung concern to come with PGA combination products that are common in any elderly population. We expect that Rackman had to be approved in early twenty twenty one by the European Commission.

[00:13:49] The European opportunity will materialize. As you might expect. We are seeing quite a bit of inbound interest from potential partners regarding the commercialization of our glaucoma franchise in Europe. As I mentioned before, and a number of different calls, Mercury three was not for approval. It was mainly for to help us with the pricing in Europe. So as a result of not achieving non inferiority there, we think that we are able to get a great price in the European markets. Now, shifting gears to our manufacturing prospect, the growth of our franchise in the US and the potential in Europe and Japan will certainly benefit our Athlone manufacturing facility, where we’re already seeing a reduction in the capacity as volumes begin to increase at that plant. As you saw, Athlone is now approved, a matter of fact, to repress as well as Wroxton for commercial distribution in the US market. And we’ll manufacture product for Japan as part of the Santtana collaboration. We will also be making clinical supplies as we conduct clinical trials in Japan.

[00:14:54] Turning to our pipeline, we announced last week we initiated the phase to be trial for our DRI product candidate H.R. one five one five five one two that we obtained through our late twenty nineteen acquisition of a vessel in Spain. We met with the FDA late in the second quarter and will test to concentration of this product candidate in highly powered 90 day phase to be trial. And we’ll have about three hundred sixty subjects in that trial. We think assuming success, which this could be potentially considered a pivotal, pivotal trial, the active ingredient in five one to his opponents, selective agonist of the Tripa made ion channel. It’s a cold sensing and osmolarity sensor that regulates it to your production and blink rate in the eye. Interestingly, activating the sensor may also reduce ocular discomfort by promoting a cooling sensation for the upcoming trial, known as Comit One. We expect the primary endpoints to be ocular discomfort, which is a symptom and tear production, which is a sign. We’re also adding a number of secondary endpoints of the trial such that we can learn as much as possible about the drug’s performance.

[00:16:08] With 30 million DRI sufferers in the US, we expect rapid enrollment in the program and we’re targeting a top line readout in Q3 of twenty twenty one. Now, turning to our Retin-A pipeline, the more we learn about the market in the US and so more in Europe, the more excited we get about the prospects of our sustained release. Steroid Product R11 05. The Phase two study topline data we released a couple of months ago indicated up to six months of sustained efficacy in retinal vein occlusion for this dexamethasone implant. We believe this further validates the potential of our sustained release technology based on the very flexible print manufacturing technology, along with the use of biodegradable polymers. The closest injectable steroid competitor generates about four hundred million dollars in total, about one hundred million of that comes from the US and surprisingly, about three hundred million come from European sales. An interesting point is that this competitor with three hundred million in sales in Europe generates over that generate twice the sales of the largest glaucoma products in Europe, which, by the way, the largest one happens to be Gane Forth, which generates about one hundred one hundred fifty million in revenues. In practice, the steroids are often injected or at least the steroid is currently available. It’s injected every two months as there were releases earlier or not sustained. We believe our product has the potential to yield a differentiating benefit by requiring less frequent injections, therefore reducing the burden on the retina physicians and the patient.

[00:17:47] The European market has always been more open to injectable steroids than the US market, which tends to favor, you know, the anti veg products. We believe the well tolerated six month steroid injection that is favorably price to competitive steroids. And certainly the anti veges has the potential to not only obtain share in that steroids base, but also to expand the steroid market within the 10 billion combined US and European markets. Additionally, we have a capability where we can utilize our technology to manufacture these tiny implants at a rate about a half a five hundred thousand per year and only about a thousand square feet in our facility at our corporate headquarters in Durham, North Carolina. We believe that the efficiency of our manufacturing process may also contribute a sizable margin opportunities. If the product is ultimately approve, it commercialize while also driving overall economic value to the patients and the physicians. From a commercialization perspective, the size of the retinal sales forces can be quite small. In fact, when you may remember that we talked about if we commercialized on our own in Europe for the on the consumer side, we would need about seventy five sales representatives in the top five markets that we think as we we think about the European market for Retin-A, we would need considerably less than half of that size sales force in order to be successful. So, again, we feel very strongly that we have great opportunities in Europe from a partnering point of view on the glaucoma franchise as we are on our own, pursue the 11 five molecule are five product in that market. The next steps for 11 five or to evaluate prospects for both Europe and the US is to meet the regulatory agencies in those markets in order to harmonize the development across both regions. Great progress on the safety trial for 8R one three five oh three four wet AMD and DMAE. Remember, this is the most active metabolite of prepress over the Taqaddum which and at there we complete the safety component of Repressor over to Taqaddum, which and after we complete the safety component, we’ll evaluate its prospects as we gain more information. At this point, I’d like to turn the call over to Rich to cover the financials.

Rich Rubino

[00:20:17] Well, thanks, Vince, as Vince discussed, our combined repressor and rocketing net revenues in the third quarter of Twenty twenty totaled twenty point one dollars million. Our normalized gross margin for the three months ended September 30th, Twenty twenty was ninety two point one percent. On top of that, we absorbed about three point eight dollars million and Athlone plant overhead associated with startup commercial production. As you’ll recall, prior to the approval of the Athlone plant for commercial distribution of Rakuten in the US at the end of January. Twenty twenty these plane overhead expenses were charged to commercial manufacturing expenses within operating expenses for commercial manufacturing expense. In the third quarter, Twenty twenty was essentially zero, demonstrating once again, it is more a matter of where these costs are classified. In information statement, as I just mentioned, the overcapacity cost and third quarter twenty twenty was three point eight dollars million, reflecting a sequential decline from the five point zero million dollars recorded in the second quarter. We expect the auto capacity cost decline further to decline further over time as volumes produced at the Athlone plant continue to grow. Now that we have approval to manufacture Repressor in addition to rock written for US commercial distribution. Plus we have opportunities outside of the US such as production for Japan as part of the Sandton collaboration. Further, at the level of interest we are seeing regarding a potential European collaboration and with RICHINS already approved and in Europe and Canada expect it to obtain approval in the short term, there is near-term growth potential from the very large European market.

[00:22:01] To reiterate Vinces earlier observation, while a couple of auto volumes and the top five European nations were one hundred five million bottles in 2019 compared to the fifty five million in the US. Now, for some additional financial metrics, a third quarter Twenty twenty gap net loss was thirty nine point six dollars million or eighty six cents per share. When excluding the nine point eight dollars million of stock based compensation expense, our total adjusted net loss was twenty nine point eight dollars million, or sixty five cents per share. For the third quarter of Twenty twenty. Adjusted cost of goods sold was four point nine dollars million. In adjusted total, operating expenses were thirty nine point zero million dollars, with adjusted Aschiana expenses of twenty five point three dollars million adjusted preapproval commercial manufacturing expenses of zero point one million dollars and adjusted R&D expenses of thirteen point six million dollars for the third quarter of Twenty twenty. Our net cash used in operating activities was relatively low twenty two point four dollars million and we had Twittered eighteen point four dollars million in cash, cash equivalents and investments as of September 30th, twenty twenty, the net cash used in operating activities of twenty two point four dollars million was better than the second quarter, equivalent of twenty two point nine dollars million, reflecting continued progress in containing operating expenses. Let me emphasize an important point. We used about twenty two million dollars of cash in the third quarter and we ended the quarter with two hundred eighteen dollars million of cash. The additional fifteen dollars million from the Santtana licensing agreement obviously further bolsters our cash position. Consider also that the burden of funding the Phase three trials in Japan for Repressor and Walkerton is materially reduced and prospects for future collaborations are on the rise.

[00:23:58] With that and ongoing revenue growth, we have a substantial cash runway. And I’m going to say this slowly, there is no current need nor desire nor plan to raise equity capital. Finally, shares outstanding a quarter in total, forty six point eight million. For additional information regarding our third quarter results and prior period comparisons, please refer to today’s earnings release in our Form 10. Q which we expect to file tomorrow. Now, I would like to turn the call over to Jerome for questions. Jerome, thank you.

Question-and-Answer Session

Operator

[00:24:36] At this time I would like to remind everyone in order to ask a question, please press star one on your telephone keypad. Your first question comes from the line again from Coal and Co. Your line is now open.

Ken Cacciatore

[00:24:51] So much rich, I think you said it even slow enough for someone not as smart as me to understand. So thanks for clarifying that on Rockledge 10. Just wondering, guys, if you can talk about further work on managed care. For part. I know. I know we have pretty good coverage. Just wondering if we can expand it and when do you think we will be able to. And then second question is around what you hear from the clinicians in terms of hypothermia from time to time on clinician checks. It comes up wondering if you could put this into some perspective in terms of what type of retention rates, which I think would be the best way to monitor this. What type of retention rates do you see in prostate glAnd the prostate gland? And can you compare that to Repressor and Rockledge hand in terms of the retention rates that that we’re seeing here from a refill level? I think that would probably cut through the clutter a little bit of the hypothermia issue. Thanks so much.

Vicente Anido

[00:25:52] And so, again, let me try to cover the increase in managed care coverage, so it’s the very beginning and it’s certainly a couple of quarters ago we talked about that we weren’t going to be in a particular hurry to sign contracts where we had to give excessive rebates just to get on formularies. And so now we think that the last contract that we signed with the managed care organization that that I mentioned has about 20 percent or almost 20 percent of the Medicare lives that took us about 18 months or almost two years to to conclude. And so the level of rebates that they were asking for deserve to access it. And so we drove prior authorizations and made it pretty expensive for them not to cover it and eventually got them back to the negotiating table and came out with a contract that was acceptable to us. As Tom mentioned, we signed that contract in May and we were able to get quite a bit of pull through about a 60 percent increase in the market share within that plan. And so once we get to about doubling, then we pretty much pay for all the rebates that we pay off. So, yeah, they’re part of the deal. And so it’s that kind of deal that we would be looking for as we try to close the gap between where we are today with Medicare Part D coverage and where for rock bottom and where we are with Propecia. There’s a number of plans out there that, you know, we’re currently are bidding for and looking for those kinds of situations where we can do that. But again, we’re not in a particular hurry to just give up rebates just to get coverage and basically kill our price. We’re trying to strike that balance.

[00:27:31] We also have a number of managed care contracts where we’re looking at restating those contracts and, you know, perhaps given give it up a favorable position where we don’t think it’s actually going to hurt us by taking a step back and paying off a little bit less rebate and actually increasing our net price within the plan and not losing revenues, in fact, continuing to gain revenues. And so all that combined, I think, will help us. I’m going to have Tom talk a little bit more about the high premium rate. And as it relates to retention, you know, he’s obviously been close to what’s been going on in the field recently and can give you a little perspective on that, Tom.

Tom Mitro

[00:28:11] Sure. Thank you. So this is a question about high premium here, sort of what we think about from the high premium, really what we hear from our physicians. Certainly one of the first things physicians notice with our products is that it causes they cause high premium. What we suggest to physicians is to keep the patients on the bottle, the sample, the sample for at least 30 days, write a prescription, because the longer they stay on the product, most of the time the high premium starts dissipating, doesn’t completely go away. And in many cases. But it dissipates. It becomes very, very manageable. When I ask them about what’s our retention rates, do you think comparing either rock bottom and even repressor compared to the prostate glAnd the commerce? And it’s very similar. I would see a difference. And they start telling us things like, well, when the prostate gland is first came off because they all cost a degree of high premium, we had a lot of trouble with high premiums that we got used to it. And then we told patients, hold on, keep using the product, enjoy the fact that you’re getting very good IOP control. And sure enough, through time, their eyes got wider and less red. So I don’t know that it’s any I don’t know that’s materially different. I mean, I’ve never had a physician say, oh, this is far worse than any product I’ve used before. If they’ve used a significant amount of the product and we always tell the physicians that the more you use, the more you get accustomed to to managing Aprilia. And I think the less you’ll see your patients will be happier as well, too. So we don’t think it’s a we don’t think it’s that big of an issue. Thank you.

Operator

[00:29:41] Thank you. Your next question comes from the line of research volunteer from Needham and Co. Your line is now open.

Serge Belanger

[00:29:49] Good afternoon. Can you talk about the business environment right now, given the Colgin pandemic? Have you seen any improvements throughout the quarter? I know you mentioned that patient flow at opthamologist office has improved from 75 percent to 85 percent. You expect that to continue improving into the fourth quarter in twenty twenty one.

Vicente Anido

[00:30:16] So a surge, would you think, is going to continue improving? Certainly we do have some outbreaks occurring in various states and various state governors are responding very, very differently to those outbreaks and things like that. And so, you know, it all depends on sort of almost on a state by state case in terms of what we think is going to happen. But generally, we think this will continue to improve and more and more practices will continue to expAnd open up And gain some balance between sort of where they were recovered and where they are today. It’s interesting, we do see about five percent of the practices that simply aren’t responding at all. I mean, in the sense that they’re not particularly open or they may not be open at all. And so, no, we can’t help but wonder whether that small percent of the total practices are simply going to go and, you know, be bought by somebody in private equity or just simply decide to retire because of the changes in the environment. But overall, we think that that’s going to continue to progress. And as long as we don’t go back to the days of where they shut down, I like the surgeries which basically killed opthamologist or hit opthamologist harder than any other specialty group. Don’t go back to that. I think even on a state by state basis, I think we’re going to do pretty good. The practices that we do go into are now very, very flexible. Everybody’s got their own rules and regs that our reps have to follow when they walk in there. But overall, I like the direction that we’re going in. It’s very positive.

Serge Belanger

[00:31:52] And then second question is just about the current payer mix, sounds like you’ve made some pretty significant progress with the new Medicare Part D plan. So what is the current Medicare and commercial mix right now?

Vicente Anido

[00:32:08] Rich may have the latest data, so I’m going to give him a couple of seconds to open that up, but it is in our latest slide deck that that we put out there. But Rich.

Rich Rubino

[00:32:20] Yes, so the party and Medicaid mix in the second quarter was fifty seven percent and now at the end of the third quarter we averaged about fifty nine percent. So it’s been said in his prepared remarks, he went up about two percent and that was pretty much at the expense of commercial shrinking a bit and the other government shrinking a bit. But the thing to watch for here is sort of the rebound in the economy. You know, we saw a huge increase in the economy quarter over quarter. It depends on how quickly folks go back to work, because if all of a sudden they get started getting coverage under commercial pay, that may also be swinging some of these numbers around a little bit. And don’t forget, the more commercial coverage, the better our net price gets. And so that’s a positive thing. But again, it’s just it’s we’re going to watch it closely. But we’re still thinking that that getting to that balance is a good thing for us. And staying in the high 70s is certainly doable based on where we think the mix is.

Operator

[00:33:35] And your next question comes from the line of Dana Funder’s from Guggenheim Partners. Your line is now open.

Dana Flanders

[00:33:46] Great, thank you very much for the questions I have. You know, first on a commercial question, and I know this can vary by position, but just want to get a sense from you just for where you think Repressor and Robertson are generally being used as a line of therapy. Is it second line, third, line fourth? And then as you think about the market opportunity, how important is it for you to move up the paradigm where you are now? And what is the active sales strategy and messaging around that? And then my second question on your DRI candidate, what do you think you need to show and what do you want to show to the FDA to consider this a pivotal study beyond, I suppose, just a clear sign of up to see. Thank you.

Vicente Anido

[00:34:35] All right. So on the commercial side, I’m going to have Tom give you some more details. Right from the very beginning, we always thought that Repressor would be primarily an adjunctive therapy. So it would be added to whatever regimen the doctor had his patients on it to be. And so depending on whether it was added second or third or fourth, they would have a role to play there. And eventually, as doctors got more experience, that they would move from that repressor adjunctive therapy to saying, look what kind of pressure drops I’m getting and then I’m going to move that, perhaps get that patient off of everything except the Wroxton where they can get the biopsy drop with only one eye drop. But let me have Tom give you some details and then I’ll take the call back the answer back for your dry eye question.

Tom Mitro

[00:35:25] Sure. So what we see with Repressor to begin with the process most of the time is that it is the third or fourth medication. Now, that’s not surprising, realizing that most people can have glaucoma. Medications for many years have gone prostaglandin, started losing control. A second and third drug was added so that it happens to be the biggest opportunity. So that’s just because, you know, most most of the time, if she’s there doesn’t mean that that’s where physicians really want to use it. What we’re seeing now, though, is certainly physicians are using it more and more often when patients come in just with a prosthetic landing. And for some reason, they’re not going to kind of maybe coverage for that individual patient or some other driver. But they are using repressor much earlier in the treatment paradigm. And that’s clearly what our sales force is talking to physicians about, not just because they can use the most data to show the effectiveness of it, but also because we think that that sets down on a high premium because they’re just using less products in their eyes. So that’s a nice, sweet spot for physicians. And the more they try it there, the more they adopt that because it’s very easy. Rocketplane is there’s a switch from across the gland. And instead of adding a second medication or trying a different prostaglandin, they switch them right over to to Ramattan. That’s good as well, because there really aren’t that many new starts and glaucoma every year. It’s really going backward. And your ability to switch patients and sort of start new ones off is it’s a long term key to success. So that’s really what our messaging is all about.

Rich Rubino

[00:36:55] So the answer to your two on the dry side is, remember, this is a phase to be studying. We are powering it as a three. So we have 316 patients. We’re going to enroll in the trials and we’re looking at two different concentrations plus vehicle. And so we think that if we get that say on both the sign and the symptom, so the sign being the production and symptom being ocular discomfort, that that would serve as a strong, pivotal, and then we would only have to do one more study. We are watching pretty closely or we will be watching closely the additional information that we get, because as I mentioned in prior calls we did back, we are backing up the truck, looking at all sorts of potential secondary endpoints, looking at using the chamber or not using the chamber or guyI chamber, etc., just to really be able to, in this one study, fully characterize the activity of the drug. Because as we move forward, it’s not only making sure and certainly the job one is trying to get the drug approved, assuming that everything comes out the way we expect it to, but also make sure we characterize properly, because those advantages that we see in the secondary endpoints could certainly help build a strong picture for us as we look at contracting with managed care. Does that help.

Dana Flanders

[00:38:18] Yes, thank you very much. Yes, sir.

Operator

[00:38:23] Thank you for your next question comes from the line of Frank from Oppenheimer. Your line is now open.

Unidentified Analyst

[00:38:32] It’s taking two questions in terms of the awareness and the effort you’ve made for, would you say was the awareness there was the biggest issue in terms of reimbursement? It seems like dogs maybe weren’t aware of the winds, especially the wind from May 1st. And in terms of making them aware, was this something you had to battle because of covid or was this expected to be an educational process for your sales force?

Vicente Anido

[00:39:00] And what I can tell you is it’s this awareness issue in terms of what kind of coverage we get is probably one of the most frustrating ones that we have, because sometimes it doesn’t make any difference how many times you tell a doctor that our drug is covered. In fact, both of our drugs are covered. For your particular plans that the majority of your patients have many times they just don’t remember. They remember the early days perhaps where we had limited coverage. I’ll give you a great example. When we won this last contract, we made a point of calling all the doctors, especially in the state of Florida, where we had great coverage with this one plan. And the majority of the patients that are Medicare Part D are covered by this one plan that we just signed. And so there was a doctor that spoke at one of the investment conferences And actually talked about that.

[00:39:49] We didn’t have particularly good coverage in his area. And he happened to be in the in the middle of the Florida on the East Coast. And so even though our rep had been in there multiple times, the doctor only remembered that when he first tried to prescribe Repressor in Rockhampton, it wasn’t covered in all the trials and tribulations he went through with prior authorizations, et cetera. So it is something that not only frustrating, but we certainly addressed with the policy strategy that Tom mentioned, with the use of contract sales organization and also with telesales. We’re using them to not to call the doctors, to let them know that we’re covered, but to call their staffs, to let them know about our coverage, because we certainly have access to the data that tells us which clients are most important to that particular practice. And so we can target those calls pretty easily. So it’s certainly we’ve ramped up our effort. So, again, that’s where the opportunity is. But it’s also been frustrating because even when we get the coverage and tell a doctor multiple times, they still don’t remember because they’ve had busy practice it. It’s not just because it is just part of the way things go.

Serge Belanger

[00:41:02] Understood. Ok, and then lastly, I think touching on the rest of the pipeline, there’s a lot going on, especially, you know, not just the pipeline, but internationally and whatnot. So on the six months side, on, ah, one one zero five, that data was clearly very impressive from there. Can you just help us understand a little bit the plans going forward, what potential drug to use? And, you know, once you understand the platform works, what’s the next move? And then on the EU side for glaucoma, clearly the market is gigantic. You’ve got non inferiority. Can you also help us understand the plan in terms of timing on commercial launch? The.

Vicente Anido

[00:41:44] Sure. So what I’m going to do is cover off the commercial component of both 11 05 and the glaucoma franchise, and I’m going to turn it over to the David Hollander to talk a little bit about the next steps on the development of 11 05 on the commercial side. Let me just put this in perspective. While you know, the glaucoma market in terms of dollars in the EU is quite a bit less than it is here in the United States, mainly because the prices are so low. We compared ourselves to back and forth in the Mercury three trial. That is the highest price combination product. We got non inferiority. So we think we will get that price, which is in the mid to upper 20s per bottle. As a reminder, there are 110 million bottles of glaucoma medications prescribed. So it’s a huge market at very, very low prices. And so we think that the interest that we’ve generated will allow us to look at a commercial opportunity in terms of partnering in that space. And so that’s going to dictate when we can launch. But assuming we get approval in the early part of twenty one for Rocklands Riperton, as we expect, we’re going to be moving pretty quickly to gauge interest and see whether we know what kind of deal, where we can put together for a partnership so that we can launch RocklAnd ultimately will press into the European markets on a timely basis. A big product in Europe for glaucoma would be about one hundred twenty five to 150 million, as I mentioned earlier. So just keep that in perspective as we think about 11 05 in Europe. As I mentioned, the closest competitor that we have is Özer DAX and it sells three hundred million only in Europe and our drug works over a longer period of time for six months versus Asia-Pac two to three months. And so even if we price at the same that we think we can generate huge revenues in Europe as a result of the longer activity. So for us, as we think about it, the opportunity on the set aside with eleven point five in Europe is three or so larger than the glaucoma. So partnering with somebody already has a sales force and already can just lay our product on top of their infrastructure. Certainly sounds pretty attractive if we get up into the hundreds of millions of dollars, let’s say 150 million.

Unidentified Analyst

[00:44:15] In Europe with, say, Rocklands, translates to about five million bottles or so. Well, that’s what we get. It certainly, certainly takes care of a lot of our capacity in the Athlone facility. So that’s a net positive for us. And so, again, we’re very excited about both. But one, we’re we certainly expect a partner meeting the glaucoma. The other one with 11 05 is something that we want to make sure that we maximize the opportunity for ourselves there. And it may be that we do the whole thing, including commercialization. So with that, let me turn it over to David to talk a little bit about next steps on 11 05. David?

Tom Mitro

[00:44:59] Yes, thank you, Vince. So you saw from our press release we are studying two different formulations of these bio roadable implants. We are very excited about those implants showed very strong efficacy. One of the implants showed a little bit longer duration, which is the one we’re going to go forward with. The six month threshold is something that, you know, investigators have been looking for for quite some time. So we think that this is a huge accomplishment. We are already preparing to meet with regulators both in Europe as well as the US to discuss development plans across posterior segment diseases. So not just our RVO, which we had looked at in this first study, but across most of your segments diseases, as you know, Asia-Pac and dexamethasone and steroids in general are used for a number of different diseases of the retina. We are looking ultimately to harmonize the program. So essentially the same trials for both Europe and the U.S. We’re going to have to get agreement from the regulators on comparators and study duration. But but we should have that in the coming months. And we look forward to having a harmonized program across both regions. Hopefully that answers your questions.

Unidentified Analyst

[00:46:14] Now it does. You know, I’ve heard about the six month sweet spot for for many years now. So congrats on that and thank you. That’s it for me.

Operator

[00:46:25] Your next question comes from the line of Greg Fraser from Truly Security Sterilized Open.

Greg Fraser

[00:46:33] Thanks, folks. How much of the interactions of the sales force is having with prescribers this face to face? I’m guessing there’s a lot of variability across territories in terms of the access that the reps are getting and can comment on how overall touch points, both in person and virtual compared now with Preto the levels.

Vicente Anido

[00:46:53] You’re going to have Tom do that show.

Tom Mitro

[00:46:56] We have to first off about eighty six percent and the last report of our interactions with physicians are face to face. The other 13 percent are virtual. So we’re very happy with that number. And that number has been been increasing month by month by month. And it’s very, very good from an overall activity or, quote, number of calls we’re making. I won’t give the exact number of calls we’re making for competitive reasons. I can tell you that we’re very close to the pre covid numbers, meaning that January is a good month. Comparing now to where we were in January, we are just a little shy of where we were in January, but certainly within it’s really within shouting distance, very, very close to it. So overall, we’re quite happy with the with the reach that our sales force is getting in the receptivity that they’re getting from the physicians.

Greg Fraser

[00:47:45] That’s very helpful. You’ve been growing share and what has been a pretty challenging environment for new products, but what do you need to do and what can you do to accelerate share growth, particularly if we don’t get that to a more normal environment for some time?

Vicente Anido

[00:48:01] But we certainly think that the approach that Tom has already laid out, which is the Paul strategy, where we focus focusing our own sales force on very specific portion of the audience that are doing a terrific job of growing share there and growing it faster than had we not use the Paul strategy and really limited the number of of doctors that they need to call on. And so we think that that was very important. First step, second great step in decision that was made was to bring in a contract sales organization to pick up a number of the physicians that our own sales force is not going to call on. And as you heard Tom mention, the CSO came on board in July of this year and has already done a great job of growing market share within the physicians that they call on. So it is paying off. Third one is they use the telesales and that’s got two components. Number one, they certainly are calling on the doctors that are sort of the lowest prescribers and the reaching out to those And getting started and having great success and getting those doctors to write prescriptions for the repressor rocketed. So we’re happy with that. And it’s an easy and very inexpensive way of reaching them and one that we can expand easily. One of the most important roles we’re asking that group to play is what I mentioned in my response to one of the frustrating things that we have about making sure doctors understand what kind of coverage we have using telesales to call on doctor’s offices, not necessarily to talk to the doctor, to talk to their staff about the kind of coverage we have in their particular area is is, we believe, critical to making sure that we don’t lose script because the doctor remembers the days when we weren’t covered. And so we think that that those are the kinds of things we have to be able to do to continue getting the pull through that Tom mentioned we had in this plan that we signed in May where we’ve seen a 60 percent increase in our market share within that plan in a very, very short period of time.

Greg Fraser

[00:50:11] Great, thanks for taking the questions. Yes, sir.

Operator

[00:50:15] Thank you. Your next question comes from the line of Muppet’s, from Citigroup. Your line is now open.

Unidentified Analyst

[00:50:24] Hi, this is Kevin Becker on for you. Thanks for taking our questions on net pricing. Can you provide some color if it’s reasonable for us to expect a comparable increase in net revenue per bottle from ninety four dollars net in 3Q 19 to one 20 net four to 19 due to end of year Medicare Part D coverage gap impact.

Vicente Anido

[00:50:48] I like that, yeah, so I wouldn’t really be looking at those trends from last year. Yes, last year was our first full year of having to manage through the coverage gap. But, Kevin, the way we account for the coverage gap exposure is we accrue it evenly through the year. And now, of course, we have much more experience than we had last year. So you shouldn’t be anticipating any significant quarter over quarter impacts on net revenue per bottle based on the coverage gap dynamic in the course of the year.

Unidentified Analyst

[00:51:28] Ok, great. And about your new partnership with Sampan, can you clarify the conditions or breakdown under which areas eligible in excess of twenty five percent of product net sales? How should we think about the net royalties for the products in Japan?

Vicente Anido

[00:51:59] So, Kevin, so, you know, we’ve agreed with our partner in terms of the kinds of things we can talk about, all we could say is that it’s up to or greater than twenty five percent royalty. A portion of that is going to be the COGS component and the balance is going to be royalty on on our intellectual property. And so as, for example, our cogs go down, the overall cap on or the actual royalty number stays the same. So the royalty component for the hockey stick goes up. And so that’s that’s as close to sort of a detailed explanation that we can give you without actually giving you stuff that we’re not going to divulge.

Unidentified Analyst

[00:52:46] Ok, that’s very helpful. Thank you very much. Thanks.

Operator

[00:52:51] Thank you. Your next question comes from the line of Lewis from Canada. Your line is now open.

Louise Chen

[00:52:57] Hi. Thanks for taking my questions here. I had a few. So first question I have for you is, how should we think about that 50 million coming in in the fourth quarter? How is that going to be accounted for? And then you mentioned this EU collaboration a few times. When do you think we’ll hear another update? Could it be before the end of the year or is it more a Twenty twenty one event? And last question I just had here was just how we think about unemployment in Twenty twenty one and if that will impact any of your reimbursement for your product. Thank you.

Vicente Anido

[00:53:28] So let me talk about the EU and I’ll do the unemployment thing. I’m going to have to talk a little bit more about the accounting on the 50 million or so relative to the EU partnership. Again, these were mainly inbound calls just started shortly after we got the Mercury three drita, pretty consistent with what we saw in Japan when we announced the phase two results over there. And all of a sudden we started getting the inbound calls. The difference between the two is when we were looking at the Japanese data was specific for that market, even though the Sandton deal we ultimately negotiated for Korea and a number of other smaller countries in this. Currently, the inbound call is principally for Europe, but certainly among the many areas that folks want to talk about are some of them want to do European, only others want to do Europe, but are also asking questions about China and Middle East and Latin America and things like that. And so it the honest answer is it’s going to depend on how complex the deal ends up being and how many territories are included, et cetera. In terms of what the timing is, it took us roughly a year to go through and get everything done or actually not quite a year to get the Japanese deal done. So hopefully it doesn’t take that long and we’ll be able to move through a little bit faster than that. But it’s until we get everybody into the data room and see sort of the how complex of a deal they’re talking about relative to territories and things like that. It’s a little bit too early to tell. How long can we guide you for that? But certainly is there’s no way that we’re going to be able to sign it between now and December or the end of December so that with that much I can tell you. And let me just have Rich talk to you about the 50 million I’m sorry, let me do the unemployment thing now. So we think that the unemployment is impacted by the movement of patients into other sorts of conditions, which some of them just lose it all altogether. And they’re stuck with, you know, having to pay cash, which is the ultimate nightmare scenario for those patients that they move into Medicaid components and, you know, some other government programs, et cetera, et cetera. And so we think that the unemployment rate numbers relative to reimbursement of our products ought to have played out now. And so we do see that that we we’ve seen those hits, if you will, as we get to that high 70s net price per bottle. So I don’t think that that’s going to impact be impacted dramatically on a going forward basis. All of a sudden, we have another 30, 40 percent increase in the in the economy in the fourth quarter. Perhaps you’ll see more folks going back to work and we’ll see some more folks being covered by commercial plans. And our net price goes up a little bit. But we think that the ballpark of that high 70s sort of gives us a pretty good area to be in, at least for the for the time being. So that’s on the employment unemployment. So let me have Rich talk to you about how did the accounting on the 50.

Rich Rubino

[00:56:51] The we’re still evaluating the accounting on the 50 this quarter, but it is probable at this point, based on the work we’ve done to date, that, of course, we’ll put the cash on the balance sheet. That’s unfettered cash. And we’ll probably take the offset not to revenue, but to deferred revenue on the balance sheets will be managed through the balance sheet. I’ll say this slowly again, since I’ve been speaking slowly tonight, do not put revenue in your model for the fourth quarter for the Sandton deal.

Operator

[00:57:29] Thank you. Thank you. Thank you. Your next question comes from the line of Nick Corvino from Stifel.

Unidentified Analyst

[00:57:41] Good afternoon, everyone. This is Nick on for Annabell. Congrats on the quarter and thanks for taking our questions. First off, this may be a little earlier optimistic, but what do you think might change in the trajectory for Repressor Rossington in a quote unquote, normalized environment? Any changes in your initiatives or expense structures? And then secondly, with several DRI programs emerging in the landscape, where do you see your Tricom inhibitor fitting in the acute chronic steroid with steroid and at what level of patient severity? Thank you.

Vicente Anido

[00:58:23] So on the repressor, often commercialization efforts and things that, you know, we’ve gone through the various steps here and we talked about the contract sales organization being added to our own guys. And then on top of that, we had a telesales. I think that and Tom, during his prepared remarks, talked a lot about the the continued movement and the of some of the programs that we’ve been running as educational programs. And so so we think that that general mix is going to stay the same. The sole exception, at least in my mind, is is going to be on that incremental support on the telesales side, because we’ve got to do whatever we need to do in order to make sure that the doctors understand that our products are covered. That’s the single most important thing that that telesales team is going to be able to do to supplement the efforts of both our own field folks as well as the CSO. So we don’t see dramatic changes in the cost structure associated with that. But certainly those are the components. We’ll continue with our own sales force to continue to contract group and if anything, build out the sales team or the telesales group. But that is also the lowest cost option that we have. We will continue the ban on our manpower, promotional components and the educational programs and things like that. But given the as Tom mentioned, the level of activity we’ve seen in that, I don’t think it changes our expense structure dramatically on the dry side. So we think that the unique mechanism of the drug in terms of basically the cold sensing receptor in the eye, it becomes a big deal because we do know that the drug works. You know, it’s just like you walking out on a really cold, windy day and immediately your eyes tear up or that’s the receptor we’re talking about.

[01:00:18] And so as it cools down, the eye feels better. And so that’s where we get the improvement in the symptom side. In addition to the increase on the production side, we see our drug working as a standalone. We see our drug working in conjunction with other drugs, whether it’s Restasis or Zida or Sakwa or or any of the other products are out there or the if they’ve got them on a have got a patient that are trying to get on Restasis or Zida and they provided a run in with a steroid, we’re not going to negatively impact the use of those. I think it’s going to be as we think about those 30 million patients out there where we’ve only we’re only treating two or three to two and a half million of them. There’s a bunch of them that aren’t getting treated, maybe because the drugs that they tried aren’t working, or maybe they use one prescription or another. We think that many of them will give this drug a shot, especially if we’re able to replicate in our phase two beach studies or in our clinical trials or going forward clinical trials, the same results we saw in the phase two way. And so, again, we see it use pretty broad based. And in terms of the severity, it’s a little bit too early to tell. But again, we think that the mechanism plays well across a number of different fronts here. And I think it’s going to be driven mainly by patient except the individual patient acceptance, as opposed to any broad gauge of, you know, mild, moderate, severe patients.

Unidentified Analyst

[01:01:54] All right. Got it.

Vicente Anido

[01:01:55] Thank you very much, sir.

Operator

[01:01:58] Thank you. Our next question comes from the line of data from your line is open.

Dan Clark

[01:02:06] Thank you. This is Don Clark on for a fact. Just just one from us. Following the coverage of 10 to 20. How should we think about the potential further uplift in volumes from that wind over the next several quarters and any further implications to that price from that deal for the remainder of the year and into 2022? Thank you.

Vicente Anido

[01:02:28] So we think that the continued penetration into that particular plan is going to continue to grow, as I mentioned earlier, we’re up 60 percent and or Tom mentioned, we’re up 60 percent already after just a few months, we think that that trajectory will continue to grow. We’ve got folks that are up two and a half X from their base lines. And so we think that there’s an awful lot of room for growth and continued growth. And we see that all the way across all plans because the things that we’re doing and the plan that we’ve signed back in May, we’re duplicating across the country with all the plans where we have contracts and is, as I mentioned, this telesales activity to making sure people know that what plans we have coverage and we’ll spread that out over the country. So we hope that that those revenues will continue. We’re not making any projections about Q4. I got to tell you that we do see some pretty nice growth already. And in terms of our net sales out from wholesalers to retail and we report those out and you could see sort of the trajectory of those numbers in our latest slide deck that we put up on the site. And so, again, we do see that occurring. But making projections at this point, we’re not quite ready. And as I mentioned, the only thing that we don’t know is are we going to see because of some spike in one state, sort of a contraction of the business there or a handful of those states. And so that’s the only reason why I can’t actually be predictive about this. And so that does make it a little bit more difficult for us. And in terms of the impact on that price, we’ve seen most of the hit already relative to that the newest contract. And so any time that we sign another big deal, just like the one that we signed back in May, we’ll tell you about it and we’ll let you know whether that’s going to have any kind of impact on that price. But we’re being pretty careful about the kinds of deals we signed just to make sure we balance out the opportunity relative to, you know, growing the business if we’re going to give up rebates. And so for now, I think we’re we’re we’ve got a pretty steady hand on this thing. And that upper 70s is is as good a numbers we can give you right now.

Dan Clark

[01:04:53] Great. Thank you, sir.

Operator

[01:04:57] Thank you. There are no further questions at this time. I would now like to turn to offer back to the Amiga. I was chairman and chief executive officer for final remarks.

Vicente Anido

[01:05:09] Thanks, gentlemen. Thanks, everybody, for the questions. And I know you’re busy time and I appreciate you taking the time to listen to our call. We think that we had a great quarter and serve everything from a commercial point of view in terms of what we’ve been able to do. The repairs and Rakuten, along with building the pipeline And looking at the prospects for products like 11 05 out into the marketplace is great. And then also continuing to build our overall company with the international efforts. And that Sandton deal was a great first step and are looking forward to seeing if we can duplicate the success there as we start talking about Europe and other territories. And so we’re excited about everything that we’ve been able to accomplish. We certainly are excited about the financial prospects. I don’t have to talk as slowly as Rich did in terms of making sure that you understand, I think you do that, that we had a great financial quarter adding the upfront payment from the Japanese deal on top of our cash balances, combined with the continued growth of our revenues, along with control on expenses that certainly has led us to low cash burn rates. And we were excited about being able to perform that way and look forward to doing so on an ongoing basis. So, again, thank you for the time and have a good evening.

[01:06:31] Thank you, this concludes today’s conference call, you may now disconnect. Goodbye.