Aerie Pharmaceuticals, Inc.
Q4 2020 Earnings Call Transcript

Published: 26 Feb 2021

[Operator:]

Good afternoon and thank you for standing by and welcome to the Aerie Pharmaceuticals Fourth Quarter and Full Year 2020 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session, and instructions will follow at that time. Today's conference call is being recorded.

[Ami Bavishi:]

Thank you. Jerome. Good afternoon and thank you for joining us. With us today are Vince Anido, Aerie's Chairman and Chief Executive Officer; Tom Mitro, Aerie's President and Chief Operating Officer. Rich Rubino. Aerie's Chief Financial Officer; David Hollander, Aerie's Chief Research and Development Officer; Casey C. Kopczynski, Aerie's Chief Scientific Officer; and John LaRocca, Aerie's General Counsel. Today's call is also being webcast live on our website. investors.aeriepharma.com and it will be available for replay as indicated in our press release. Now for forward-looking statements and non-GAAP financial measures. On this call, we will make certain forward-looking statements including statements, forecast and observations regarding our future financial and operating performance, impacts of The COVID 19 pandemic including our observations regarding ongoing operating expenses and net revenue per bottle. These statements will include observations associated with our commercialization of Rhopressa and Rocklatan in the United States, our collaboration in Japan and prospects for a potential collaboration in Europe. 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 a newly introduced preclinical pipeline candidate. 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 expectation. Investor should carefully read the risks and uncertainties described in today's press release as well as the risk factors included in our filings with the SEC. We assume no obligation to revise or update forward-looking statements whether as the result of new information, future events, or otherwise. Please note that we expect to file our 10-K tomorrow. In addition, during this call we will be discussing certain adjusted or non-GAAP financial measures. For additional disclosures relating to these non-GAAP financial measures including reconciliation to the most directly comparable GAAP measures, please see today's press release, which is posted on the Investor Relations section of our website.

[Vince Anido:]

Thanks Ami and good afternoon everybody and thanks for joining us today. We have quite a bit of good news to cover today, including our strong fourth quarter results, positive outlook across our global strategy, an excellent progress with our pipeline including a brand new preclinical implant that may once again demonstrate the value of our sustained release implant platform we call PRINT. Let me start with the fourth quarter performance. Our glaucoma franchise showed strong positive momentum in the fourth quarter with unit sales in the wholesalers, as you know that's really the one that I look at the most, which is the basis of our recorded revenues increasing to 307,000 units in the fourth quarter. This represents an 18% increase over the 261,000 units in the third quarter of 2020, an increase of almost 50% from the fourth quarter of the prior year 2019. Our full-year 2020 net revenues of $83.1 million are up to shy of 20% over prior year, and our volume has certainly helped with significant gains in payer coverage in 2020 along with increased awareness of our product profiles; and as I've mentioned before, stabilization of our net prices. The net revenues of $24.7 million for the fourth quarter increased nearly 23% compared to the $20.1 million in Q3 of last year as we further penetrated our formulary contracts and garnered further increases in the number of regular prescribers we have for our products, and Tom will be discussing that a little bit later. On our third quarter earnings call last November, we called out our expectations regarding the future stability of our net revenue per bottle. In fact, fourth quarter net revenues per bottle was $80, $3 per bottle higher than in Q3 and consistent with Medicare Part D share. As we discussed previously, our strategy to increase the net revenue per bottle over time including renegotiating wholesaler agreements and refining some of our managed care formulary contracts and along with modest price increases would help us get to that stability and eventually start seeing a net price increase over time, and it's point that new wholesaler agreements are in place and the price increases have been implemented, managed care formulary contracts have been refined, and we are going to continue to do that throughout 2021 and some of these contracts that we are reestablishing would not actually impact our revenues, our net price until 2022.

[Tom Mitro:]

Thank you, Vince. Our glaucoma franchise continued to outperform the glaucoma market and all other branded glaucoma products. Our fourth quarter 2020 franchise prescriptions were up 25% or 32,000 prescriptions over fourth quarter of 2019, while the glaucoma market was down 3% or down 261,000 prescriptions for the same period.

[Vince Anido:]

Thanks, Tom. Shifting to our international expansion or Santen collaboration in Japan is moving forward on schedule and the first of the Phase III trials there is well underway. We do plan to readout the topline results for this trial later on this year. We believe Santen will be an excellent partner in Japan and ultimately some of the other Asian markets like South Korea and Thailand and Vietnam as well. On the heels of the full regulatory approval for our glaucoma franchise in Europe, along with a positive topline Mercury 3 data, we are seeing meaningful inbound interest from sizable collaborators, potential collaborators in the region, folks that are interested in licensing the products and commercializing in Europe. While these discussions continue, we are proceeding on our own to begin the process to obtain pricing in Germany such that no time is lost. Now this is consistent with what we did in Japan, whereby we negotiated with the PMDA, as a reminder, that's the FDA in Japan on the Phase III pathway there before we signed with a partner, again to ensure continuous forward momentum. As we have said before, the glaucoma market in the top 5 European nations alone totaled over 100 million bottles in 2019 compared to about 55 million bottles in the US. We believe the volumes from Europe would represent an excellent opportunity to further utilize our Irish plant, which is already growing in volumes due to the production for the US market and we ultimately anticipate producing for the Japan market as well.

[Rich Rubino:]

Thanks, Vince. As Vince discussed our combined Rhopressa and Rocklatan revenues in the fourth quarter 2020 totaled $24.7 million. Our normalized gross margin for the fourth quarter was 92% that is consistent with previous quarters. In addition, layered on top of cost of sales is approximately $4.6 million in Athlone plant overhead associated with start-up commercial production. Since we are in the early stages of production that idle capacity number will fluctuate depending on a number of batches produced in a quarter, but it is expected to trend downward as we continue to add volumes to the Athlone plant. While we aren't providing specific guidance for '21, we do expect a reduction in our capacity expenses for 2021 as compared to 2020. Our fourth quarter 2020 GAAP net loss was $46.1 million or $1 per share. When excluding the $9.6 million of stock-based compensation expense, our total adjusted net loss was $36.5 million or $0.79 per share. For the fourth quarter of 2020 adjusted cost of goods sold was $5.9 million and adjusted total operating expenses were $44.8 million with adjusted selling general and administrative expenses of $28.4 million and adjusted research and development expenses of $16.5 million. For the fourth quarter of 2020, our net cash provided that is provided by operating activities was $22.4 million dollars and we had $240.4 million in cash, cash equivalents and investments as of December 31,2020. The net cash provided by operating activities in the 4th quarter 2020 of $22.4 million includes the upfront payment of $50 million from Santen from which we netted $45 million after withholding taxes. The Santen payment turned our net cash flow to the positive for the 4th quarter. So we ended the year with a solid cash balance with 2021 prospects, including growth in net revenue, continued controlled expenses, and a potential European collaboration, all positive elements to preserve cash. Shares outstanding at quarter end totaled $46.8 million. For additional information regarding our 4th quarter and full year results and prior period comparisons, please refer to today's earnings release and our Form 10-K which we will file tomorrow. One side note on our 10-K, it will have new and very useful disclosures on human capital and ESG which covers the degree to which Aerie has and will continue to incorporate environmental, social, and governance attributes into our operations. We take ESG matters very seriously and I believe you will find our new disclosure helpful in gaining further insight into our ESG posture. And now, I would like to turn the call over to the operator for questions. Jerome?

[Operator:]

Thank you. Your first question comes from the line of Annabel Samimy from Stifel. Your line is now open. Annabel Samimy if your line is on mute please unmute.

[Annabel Samimy:]

Hi. Sorry about that. Thanks for taking my questions and a great end to the year. I've got a few questions. I was wondering where to start, but maybe we can start with expectations for revenue per prescriptions going forward, obviously you’ve given some nice color, on that you've gotten some benefit from wholesale agreements and managed care contract improvements. Should we assume the same trends, I guess, a more challenging first quarter now and improving net pricing over the year, is this a trend we should assume. I think in the past year, this has been different based on the mix, but maybe you can help us on that and I have got some follow-ups also.

[Vince Anido:]

Hi Annabel, and thanks. We do think that obviously the first quarter is always pretty challenging right. So, if you take a look at sort of what's been going on and we've got more and more Medicare business that we now have under contract, etcetera. Typically, Q1 is a little bit soft only because of the, what's going on with the deductibles having to be met etcetera, and right now certainly over the last week or 10 days, the weather certainly hasn't helped because we've seen a real slowdown in terms of the shipments out from wholesale to retail and shipments into the wholesalers themselves. And so -- but I think there's plenty of inventory, so what we're seeing is after that 10-day period, a pretty good rebound and so I think we'll be in pretty good shape. Certainly, as we look at this week, it looks pretty strong and we expect that that's now going to continue. So yes, I think the overall trend is very, very positive, we've got quite a bit of information relative to our pull-through into major plans when we signed up in May of last year, we went from just a real small market share there about 0.8 or something like that, and we were able to drive that and almost double the market share, and it's just that more than pays for the rebates, and so the sales organization, I think has hit a stride and is now focused on pull-through as Tom said and it's beginning to show up, so we expect our units to continue to grow. We do expect our prices now to stabilize and we will continue to grow as we see the impact of the renegotiations or the negotiations that we had with both wholesalers and some of the plans, and so we like the position that we are in at this point.

[Annabel Samimy:]

Okay. And then, maybe we can talk about your new program, the axitinib program. Obviously, your big point of differentiation is a potential 12-month duration. There are a number of other development programs that are sort of slightly ahead of you stating the obvious here. But outside of the duration, is there anything different about you expecting program and swing over the 13503 as we've seen that there is going to be no data readout this year or so. Are you deep prioritizing that program in anyway, you need to do a little bit more work on those formulations from what you're -- based on your comments.

[Vince Anido:]

Sure. I have to give you a general answer, and if we end up having to get more specific over time we have kept both Casey, as well as David on the call, so we can call on them, but on axitinib, you're right it is for 12 months delivery and that certainly puts us apart -- sets us apart from just about everybody else out there that's working on in this category, we’re focusing on 6 months. I think the big thing there is you have to understand that axitinib has a very specific environment in which it has to live, if you will, in order for one to control the release of that product from any formulation and certainly our insert. And so, what is really different about what we can do is we have access to an array of proprietary polymers, and in this particular situation, the team actually mixed and matched a number of different polymers to see which ones and in which concentrations we need to put them together to create the right environment to make axitinib soluble enough so that we can control its release because there's plenty of data available that indicate what level of dilution rates we needed to have for the product. So, what concentrations we need to have in the eye to see the effect and that's how we've built the inserts, and that's why not only can we get enough juice in there meeting in order to see the effect, so we know that we can maintain it with the inserts and its blend of polymers out over 12 months. So, it's two things combined, the flexibility of the technology to allow us to deliver it over 12 months along with the formulation capabilities of having multiple polymers in there that give us the differentiation we're looking for.

[Annabel Samimy:]

Got it. And just as 13503, if you could just give us a little bit of clarity there.

[Vince Anido:]

So, yes, on 503, so it's really interesting, so we know based on all the work that we've now done with 1105, that the PRINT technology works because we knew what concentrations of dexamethasone we need to get into the eye to get the six month effect that we were shooting for. In the case of 503, so we now have proven PRINT but now we have to prove that we understand what the right concentration is of 503 to get the kind of effect in the back of the eye that retina physicians are expecting to see for conditions like wet AMD and DME et cetera. And we just haven't found that yet. We're looking at right now using the original insert and inserting more than one as a way of fluctuating the concentrations to see where that gets us and see whether that's an indicator of what the right concentration is. And so, as soon as we finish this next set of patients, which is again very, very small trial, but as soon as we get the next set of patients, we're hoping that will give us a clue as to what the right concentration is for 503, and then we'll be able to sort of kick that program in the high gear.

[Annabel Samimy:]

Okay. If I may ask one more question, since I've got the clinical guys here, I want to ask about the TRPM8 agonist program, so we know that the work that you've done or the work that's been done so bigger effect in a more severe population that's where you saw some p-values that were acceptable. So you're moving probably -- you're probably moving forward obviously in this more severe population space and get those effects, but it seems like you've been always angling to try to get a broader population including mild patients or mild to moderate patients because of the cooling effect -- or the symptom effect. So how do you sort of reconcile the focus on the severe population, the clinical trials and then the marketing all of it to more mild population. Thanks.

[Vince Anido:]

So I am going to have David actually get -- get a little bit into the details on the clinical trial design that will help us answer the questions that you're looking for. But just needless to say in this Phase IIb trial you may remember that I used the words we backed up the truck for all secondary signs and symptoms that we can think of and all sorts of different ways of studying for dry eye because we wanted to make sure that we use this particular Phase IIb trial, which again is powered as a III as the biggest data gathering study that we can possibly design and so that's what the team was able to do, we are doing it both environmentally as well as in the chamber and things like that, so we think that will be able to gather huge amount of information that will help us not only further characterized molecules, certainly design the next set of trials, would give us a leg up in terms of understanding how best to tell the story as we get in -- when we eventually commercialize this product if approved with the managed care agencies or authority, so David you want to talk a little bit about the clinical trial design and answer Annabel's original question.

[David Hollander:]

Sure. So, great question. Obviously, we're focusing on ocular discomfort and tear production as our primary endpoints for symptom and sign, but we have built in a series of different endpoints, both environmental as well as using the controlled adverse environment, otherwise known as the chamber and looking at a series of endpoints over the course of three months. Just to touch on your original question, as you well know and as doctors and patients have experienced signs and symptoms do not always correlate and what we saw in the Phase IIa trial was actually very nice tear production across the entire patient base. There was also a nice improvement in symptoms across all the patients, the p-value was noted in just the more symptomatic patients. What we have represented in our faith in our Phase IIb trial is actually a fairly broad dry eye population across most signs, they just happen to be a little bit more symptomatic. The other thing we've added in that wasn't part of the Phase IIa is all patients will be running on vehicle, and if they have an improvement on vehicle, which is basically an improvement on artificial tears, they're not going to be included in the study. So we're particularly focusing on the symptomatic patients with a broad array of signs who do not improve on vehicle and those are the patients we are testing and at the end of the day that should very well represent a broad array of the dry eye patient population out there.

[Annabel Samimy:]

Great, thank you.

[Vince Anido:]

Great, thanks.

[Operator:]

Thank you. Your next question comes from the line of Ken Cacciatore from Cowen and Company. Your line is now open.

[Ken Cacciatore:]

Hey guys, good evening. Great to see the momentum moving in your favor here. Just a couple of questions. First, just wondering, as you have a lot more experience now and obviously parity and coverage between Rhopressa and Rocklatan or at least we're getting there. Can you talk about the sales force and the refinement of the message, as we worked now deeper last year into this year. Are you positioning one product over the other. Is this a more of a focus on Rhopressa and Rocklatan complements. Is there any good learnings you can tell us that had been may be helping with this momentum? Second question I have is just on potential magnitude of the European agreement. I know you don't want to negotiate against yourself here on the line but can you give us a sense in terms of maybe structure vis-à-vis what you were able to secure on the Japan agreement. And then lastly, I just want to clarify the IND timing for 14034, if you could just repeat what it was that you said on the call. Thank you so much.

[Vince Anido:]

Sure. So Ken, I'm going to take care of both the EU as well as the IND answer and then I'm going to have Tom talk a little bit more about what we're doing from a messaging point of view out in the field. Related to the agreement that we have and the interest that we have in doing partnerships for Europe, needless to say we have an awful lot of interest as I mentioned, we have a lot of folks who have a lot of experience marketing ophthalmic products in Europe that are interested, the thing that we're looking at is we've got everything from somebody who is looking at not only Europe, but wants to add other territories, like for example, buying our Latin America, the Middle East, et cetera, et cetera. All the way down to Europe only. And so that's going to dictate an awful lot of what we're trying to do or what we're able to do relative to the pricing point of view and/or the negotiation point of view. We think that the upfront that we got in Japan was exceptional, and certainly, we think that that's a reasonable starting point for looking at European deal as well as additional milestones and royalties and stuff like that, which are more in market dynamics. So in the mid-teens or so -- I'm sorry, in the mid-teens to mid-20s and things like that, but more importantly to us just is working to us is the manufacturing part of it, because obviously we've got the plant in Ireland, we know how to make Rhopressa and Rocklatan, we got capacity there that we can do that. And just like for Japan, we're going to be manufacturing for that market. We do want to make sure that as part of this agreement for Europe and other territories that we get the manufacturer that I think is an important component for the future of our company and we cannot put a dollar value on that, because the more of that capacity and as long we use, the better our overall gross margin looks in, so it's pretty easy from a financial point of view to see what that impact is. So, hopefully that helps on the EU partnering side. On the IND side, we would be filing that later on this calendar year as we gather some additional information, so we think that we'll be able to move that forward. And so let me now turn it over to Tom to talk about messaging in the US.

[Tom Mitro:]

Thanks, Vince. Thanks, Ken. So here's how things have changed over the last years up until the majority of last year when our reps really did was sell physicians and getting them to do prior authorizations because we didn't have the managed care coverage that we have now that we received last year. So they had to talk physicians and they do it get because you probably realize, it's a -- there's a lot of pain and time that it takes for a physician to be able to do those prior authorizations that our representatives kept saying keep doing and keep doing it in sooner or later, managed care will respond and by the way they did it just you may remember the numbers but through our launch physician submitted over 150,000 prior authorizations for our products to managed care, which shows that we were successful on that. And again, the end result is we have very good coverage that we have. Now our positioning is back to a more classical positioning meaning we are talking about benefits of patients and what patients to use it on right, so well normally what we talk about Rocklatan we mentioned to things. One, it's a great to consolidate medications many patients are on more than one medication as you well know, they are on 2 or 3, they are using prostaglandin and something else. We could say you can get rid of that and get rid of 2 bottles just go down to one bottle, so consolidation along with efficacy is a real driver for that. Of course, the other one we're looking for the other type of patient is a patient that is using a prostaglandin and needing a second drop, so instead of adding another drop that is going to make the regimen more complex, harder to follow, adding additional co-pay those sorts of things we can say go to one copay, a simplest drug and the most powerful drug you can use and that is Rocklatan. Rhopressa is also easy one as well too, because what we talked about with Rhopressa is either initial therapy for those people who don't want to use the prostaglandin because of the AEs associated with prostaglandins and that's not a big market, but the other one what we're doing is an additive drug to a prostaglandin now I believe that is the patients will be using something like Travatan or an alcon product or Lumigan, the Allergan product and they would be willing to add that in that because they may be just fans of those products not necessarily Latanoprost. So, we take the easier route and to say add Rhopressa into that regimen. And as you know from our previous calls, the data that we have to support that of course is our most Phase IV trial, which is highly compelling information to show the additive effect of Rhopressa is outstanding, especially compared to their experience with other addictive medications.

[Ken Cacciatore:]

Thank you so much.

[Vince Anido:]

Let me correct something I think I ended up, I misspoke relative to the IND for 14034, it is -- the IND is expected to be filed later next year, so in the second half of 2022.

[Ken Cacciatore:]

Right. Thank you so much.

[Operator:]

Thank you. Your next question comes from the line of Serge Belanger from Needham & Company. Your line is now open.

[Serge Belanger:]

Hey, good afternoon. A few questions for me. First one for Tom. Can you just, it's about marketing and pull strategy. I think you have had a couple of quarters now where you've used the contract sales force and telesales team to kind of expand your marketing reach, can you just tell us a little bit about how that has resulted in whether that's you will keep those 2 activities go on.

[Tom Mitro:]

Yes, Serge. First, we're really happy with the pull strategy and the results we're seeing already, which is very early, when we look at our 3 sales forces, we look at our Aerie sales force, you remember they call in the 10,400 physicians that we gained over half a market share point in their call that audience last year and by the way, that is a lot because this market is huge. So, that translates into a nice increase in net sales. If you go to the contract sales organization, they gained 0.2 market share points even though they just started calling on doctors in July. And again, that is not an insignificant amount, 0.2 does sound like much to stand up and cheer for, but it is when you convert that to bottles and to sales and then our telesales team gained 0.15 market share points knowing they did not start calling on physicians until June. So, what the point that we get excited about is, look back and see all 3 of our sales arms gain market share and considerable market share in a very short period of time, so we're quite happy with the strategy overall. And remember the whole strategy was designed around increasing the number of presentations and hits that we can get to those physicians. And that's why we set this up and it's working so far.

[Serge Belanger:]

Okay. One quick one for Rich on the price increase taken in the first half of January, I think if it was 5% or 10%, but how much of that do you expect to realize in win. Thanks.

[Rich Rubino:]

Well, you start -- you start realizing it as soon as you take it. So it's, it was effective January 12 and it was 4% to 5% increase for Rhopressa and Rocklatan. So you'll start seeing that certainly in the first quarter, and you'll see it through the rest of the year as well. As you know, as I've said before, that has to -- that increase is at a gross level right. So that's increase taken at wholesale acquisition cost, you don't yield all that as you funnel your way through the various rebate agreements, but it will contribute to the -- the stability and growth in our net revenue per bottle as Vince mentioned during the course of this year.

[Serge Belanger:]

Thanks.

[Operator:]

Thank you. Your next question comes from the line of Dana Flanders from Guggenheim. Your lines now open.

[Dana Flanders:]

Great, thank you very much for the questions and congratulations on all the progress. I just had actually two questions on your new preclinical program if I could. Maybe, first, can you just speak to your views on what you think kind of market acceptance will be for 12 months duration versus 6. I imagine that will be a bit of a function of kind of a rescue rate you end up seeing in your studies, but I know at least initially, that's kind of one of the reasons, some of your competitors are not going after 12. So I'm wondering if you could just kind of comment on that. And then secondly, other polymer programs have seen some particle aggregation issues, sounds like you are still working on kind of formulation, but can you just speak to your polymer blend and technology and kind of how you expect to avoid particle aggregation. Thank you.

[Vince Anido:]

Sure. So I want to take those questions backwards actually what I want to do is that I'm going to pass the second part of your question relative to the polymer aggregation et cetera and sort of where we are from a formulation point of view to Casey Kopczynski, you might remember, Casey was original founder of the company and was the main driver for the acquisition of Envisia and then I'm going to have after each completed answering, then I'm going to have to turn it over to David to talk a little bit more about the patient acceptance, physician acceptance of 12 months versus 6. So Casey.

[Casey Kopczynski:]

Yes, so the particle aggregation issue and that has risen in some other formulations, is something we were very aware of at the very start in terms of our formulation work. So we did everything to make sure that would not be an issue with our blend. I can say that the blend is not identical to but it's similar to what we have in the 503 implant. So we are gaining clinical safety data from those studies. But so far we have no evidence for any issues with respect to particles being produced that migrate to the front of the eye and we would not expect it based on how our formulation differs from formulations where that's an issue.

[Vince Anido:]

David?

[David Hollander:]

Yes. Just to touch on the goals of this program; A, it is about duration and hoping to achieve that 12-month duration. The other thing we're hoping to achieve here that will separate itself is we're not looking for there to be loading doses. So if you watch a lot of the competitive products in the pipeline, it has been sort of a steady gradual of, you get 3 loading doses and then you take out 3 months and then maybe you eke out 4 and maybe you eke out 5, we're actually looking to try and really deliver on what we believe the doctors and patients will want, which is not to have those loading doses and to have that sustained duration. As you said, we will see in that first clinical study, exactly the retreatment rate. We've been very impressed with our R&D folks in their ability to predict the 1105 is a great example of being able to predict the duration of effect and we expect to have a similar success with that prediction, but we will be looking closely at everything from month 6 on, but we do believe that the future really will be about duration and the market will be very much looking forward to something well beyond 6 months in the coming years.

[Dana Flanders:]

Thank you.

[Operator:]

Thank you. Your next question comes from the line of Louise Chen from Cantor Fitzgerald. Your line is now open.

[Unidentified Analyst:]

Hi, thanks so much for taking my questions. This is Jennifer on for Lewis. I have two questions here. The first one, I know, earlier it's been asked about how we should think about that revenues per bottle, but I was just wondering if you could get a bit more specific on how you think it will shape up over the course of 2021 and whether or not you can continue to grow beyond 2021. So I think the average net revenue per bottle this past year was around $81. Where do you think it is kind of 2021. My second question is on the axitinib based product. Have you or can you disclose the doses used in your rabbit data that was in the presentation or should we expect publications of the detailed pre-clinical data sometime in the near future.

[Vince Anido:]

Sure. So on the net pricing side you may remember that for the calendar year, you are right, we ended up with a number that you mentioned, but on the other hand, it was driven by a pretty good size number at beginning of the year. We got down into the high 70s and we call that a stabilization of the pricing and so it's been trickling up ever since. And so we do think that the negotiations that we've taken -- that have already taken place that are kicking in this year will allow us to get to, as I mentioned during my prepared remarks about a 5% increase from our exit. So again, just the 5% over the exit of about $80 or so per bottle and so we think that that's going to move forward on a timely basis and really start on this first quarter. Now in terms of future expectations, we do have some contracts that will actually kick in in 2022 and so we do expect to see continuation there, but then we're also looking at continually all of the contracts, not only the new ones that we're signing but some of the old ones that are coming up for renegotiations. And so again you will start seeing some of those kinds of activities we think, we are using the model that we talked about back in May when we signed that last deal, which is -- that was with the largest Medicare Part D provider in the country. So using that model going forward basis in terms of not only being careful about the rebates that we provide but in terms of how we position a product within the formularies et cetera. But more importantly, focusing on the pull-through and making sure that the sales force has all the data on a timely basis so that they can generate the pull-through is a key to our success. So we do expect net pricing to continue to move forward upwards, and we expect that we're going to be able to continue that on an ongoing basis. On the axitinib information which you have right now is what all that we're planning on providing, the actual information that could provide some more inkling in terms of what we can do, et cetera. We take a hard look at some of that and some of the issues for example like on the actual blending of our polymers et cetera that is proprietary, so we are not going to be releasing any of that but the actual data relative to axitinib itself is pretty well known, so you can look it up and see what concentrations are required in the back of the eye to be effective and what we can tell you is based on the information that we have been able to generate that we are delivering that amount into the eye over a sustained period of time and again as David said and we are eliminating the need for loading doses et cetera. So this is with just one injection. So that's been the target and -- and so far the guidance I believe based on everything we see, that's what we're delivering

[Unidentified Analyst:]

Okay, great. Thank you.

[Operator:]

Thank you. Your next question comes from the line of Greg Fraser from Truist Securities. Your line is now open.

[Greg Fraser:]

Afternoon, folks. Thanks for taking the questions. My first question is on the Europe opportunity, when do you expect the decision on pricing in Germany and is the pricing decision important with respect to discussions with potential partners for Europe

[Vince Anido:]

So we haven't actually started talking directly to the pricing authorities yet with our ideas and et cetera, et cetera. What I can tell you is that Ganfort is the highest price combination product and it's elsewhere in the mid '20s up there in the European market, so we do expect that because of our non-inferiority study results from our Mercury 3 data that we're going to be able to get somewhere in that ballpark. And so, Germany will be first but we do expect to start the negotiations for price, but we do expect that as we are doing that we will -- we should be able to sign up a contract -- or sign up a partnering agreement before we actually have the final price set

[Greg Fraser:]

Got it. Okay.

[Vince Anido:]

And by the way the potential partners are aware that we're moving forward with the pricing negotiations, so they are all aware that that's not going to be something that flows us down

[Greg Fraser:]

Got it, okay. And on expenses, you said, do not expect any significant increases in OpEx this year, are you holding the line on spending due to the pandemic, or should we think about the current cost structure is right sized for the longer term.

[Vince Anido:]

So, if I take you back two or three years ago, we've had about the same OpEx for quite a while now and a lot of that had to do with the decisions that we made that we were going to generate data on all of our pipeline projects and make decisions based on getting that data, but we wouldn't start any major new trials until after we had data on all the programs and so as you've seen, we've been able to control expenses now for almost 3 years. Part of that was driven by and we finished up getting Ireland up to speed. And so now it's all moving in the COGS and so that's helped tremendously. We did get a lot of our studies completed, including not only the original Phase II study in Japan but the Mercury 3, 1105 was done last year and the only and the last one in the batch that we are waiting for is 512 the dry eye asset which we will get that data later on in Q3 of this year. We won't start any additional trials until we get all that data and then kind of put it in front of us and decide how we want to move forward with further pipeline expenditures. We are taking all the necessary steps for example 1105 to move that into Phase III trials, but we're going to wait until we get the 512 data before we execute on that, because -- and again we don't expect any big spike in R&D expenditures this calendar year. '22 will be different, but we'll tell you upfront where we're going to be spending the money and why and that's more of a '22 issue than '21.

[Greg Fraser:]

Got it. Thanks for the color.

[Operator:]

Thank you. Your next question comes from the line of Francois Brisebois from Oppenheimer. Your line is now open.

[Francois Brisebois:]

Hi, thanks for taking the question. A lot was answered here but I just was wondering can you touch on a little bit more on the market, just compare and contrast Asia, Europe and the US for glaucoma. Obviously, you touched on pricing with Ganfort. But can you talk about pricing potentially in Asia and just the competition there.

[Vince Anido:]

Sure, so -- but I focused on the Japan market because that's the one that's most relevant right now. We look at that market is being just shy of $1 billion in total dollars, has many of the same kinds of products that -- that are available elsewhere. There are some, a lot of homegrown Japanese centric glaucoma products as well, but we have one payer there only and obviously it's the Japanese government and so the payer system is very specific and so -- what we do know is that they do value innovation and so having a new class of products there is very important. The fact that they already have a Rho-kinase inhibitor there, some folks would look at that and say, well, that's a negative, but in our case, we think it's a positive because that has a price already set, so that's going to be somewhat helpful but more specifically our first Phase III trial that we started prior to signing up the Japanese deal is a head-to-head trial with the product that is currently available in Japan, and again we think that we're going to be superior in terms of both efficacy and the adverse event profile, based on what we know, we are dosed once daily where they dosed twice daily we do know that they were primarily on higher pressures, which is -- are not particularly relevant in Japan and we work pretty much across the board, but we're very, very strong in dropping pressures when the patient starting pressure is already kind of low, and that's a hallmark of many of the eyes in Asia were not only do they suffer more glaucoma but their pressures tend to be relatively low and they still get glaucoma and so we think that our drug based on all the work that we've done with the KOLs in Japan is tailor-made for that particular market. So we think that the market dynamics are going to be in our favor. To help you put it in perspective on a billion -- on a $1 billion market there, the product that we're going to be going up against has been on the market now for I believe 3 years and they have just over 5% market share already. And so we think that, obviously, that's a great target for us and again because of the once-a-day better efficacy and a cleaner adverse event profile, we should be able to beat them in the market, especially given who our partner is, Santen is the largest ophthalmic pharmaceutical company in Japan. And so they have a huge amount of firepower and presence in the market that will help us move our products forward.

[Francois Brisebois:]

Okay, thank you. That's it from me. Congrats on the progress.

[Operator:]

Thank you. Your next question comes from the line of Elliot Wilbur from Raymond James. Your line is now open.

[Elliot Wilbur:]

Hey, good afternoon. So, I wanted to ask a question -- couple of questions around some revenue assumptions. I guess first specifically lot of questions on pricing, but just thinking about bottles per Rx trends, that number seems to have kind of a persistent upward bias to it. I think year-end, you are up maybe about 10% on a relative basis versus where you were at the beginning and that number has trended up to really since the launch of the products, but how do we think about that over the longer term, is there some point where that just hit the sealing and flat lines or is there are always some sort of modest upward bias to that number and referring specifically to bottles per Rx and not wholesale versus retail.

[Vince Anido:]

No, I got it. Yes, you just want to make your life more difficult for yourself doing it that way, but that's okay.

[Elliot Wilbur:]

Would not have it any other way.

[Vince Anido:]

No. Yes. And so we got a nice jump on bottles per script as we entered COVID back in March of last year, we saw a real big jump on 90-day supplies and obviously people are worried about getting to their pharmacy and running out of product, et cetera, et cetera. So that trend for us has continued. Tom Mitro was telling me when I saw him in California earlier this week that we are now sitting right around 1.44 or so bottles per script somewhere in that ballpark. And so that's again a huge jump from where we've been, because we've been in the 1.3's for a while. And so it's also hard to get that similar data on competitors, but because we have been in -- we have worked for a lot of those competitors. We think that the competitive data for other glaucoma products is sitting about 1.5 bottles per script and some of those products been on the market for quite a while. Now, what you need to understand is we are in a different environment and so with the folks really more now accustomed to what has been going on and not going to the pharmacy and moving more and more towards mail order and God only knows what impact Amazon entering the market is going to have on us, we think that that number while if you would have asked me the same question a year ago, I would say we would have a ceiling of roughly 1.5 bottles per script. But at this point given the dynamics and where we have all lived through over the last year, I'm not sure whether that's true anymore. But again for now that's what we have.

[Elliot Wilbur:]

Okay. And then, just an additional follow-up question on net pricing. It sounds like the renegotiation with respect to wholesale agreements was the primary reason behind the sequential increase in the number and just I am curious if those wholesaler distribution agreements are those based -- are those percentage numbers based off of WAC pricing or

[Vince Anido:]

It is off of our gross pricing.

[Elliot Wilbur:]

It is off of gross pricing. So it's in theory and potentially a large number of net for even a small percentage and maybe there is some additional leverage there is the franchise grow that that kind of a fair comment.

[Vince Anido:]

Yes, I think that there is that and also the way the renegotiated some of these agreements. They don't all kick in immediately, some of them are staggered somewhat and things like that. So yes -- so I think that -- that's there and then obviously as we continue to grow, we'll continue to strive towards getting those fees down as often as possible.

[Elliot Wilbur:]

Okay. Then a question for yourself or for Tom. Just thinking about renegotiating some of your larger managed care contracts going forward and you've highlighted several times, the data for the MOA trial in so the relative benefit the product sort of, regardless of where it's used in the therapeutic spectrum. Just wondering, have you guys considered some form of pay per performance incentives in your contracts, is that something that would even be possible in the glaucoma market.

[Vince Anido:]

Tom, you want to take a stab at that one

[Tom Mitro:]

Sure, I'll be happy to, You know Elliot, we don't really do those or they don't really do those that often now anymore, you talked of pretty much or get your question right, like a market share agreement, if there the market share grows from X to Y we will pay -- give you X amount of rebate, if it goes from X to Z we will pay with different amount right?

[Elliot Wilbur:]

No, I apologize. Specifically, thinking about the, the efficacy of the product, if you deliver some sort of a net reduction in IOP relative to competitors then you can basically comment a higher price point

[Tom Mitro:]

Yes. We talked a little bit initially to the payers about concepts like that. The problem is these bottles aren't very expensive compared to a much larger different class of drugs, so they are really not interested in that in ophthalmology and we would be, because our product performs well, but just don't want the time and a handful of the reporting and then coming back to do it for something that just isn't that big from a dollar standpoint or unit standpoint.

[Elliot Wilbur:]

Okay. And then last question for yourself Tom as well, just in thinking about some of the numbers that you guys have talked about from the data we look at, I mean basically looks like between -- between the closing of physician offices and the reduction in patient counts going through offices patient volumes are something around 60% to 65% of what we consider to be normal. But if you look at trends and some of the earlier script metrics such as new therapy starts and new to brand like those actually have been pretty good over the last couple of quarters, you had a dip in the second quarter, but they bounced back pretty quickly, it seems like the lag is more in refills and patients who have been on script for a longer period of time. So I'm trying to not sure what that necessarily means when we return to normal, is it just suggest a quicker bounce back or is there some way to potentially capitalize on that from a commercial perspective.

[Tom Mitro:]

Yes. Well, certainly we look at the data, it's a little bit different than how you look at it Elliot, just give you a sense for it, but in ophthalmology we know that IQVIA says the new to brand of last 52 weeks over the previous 52 were down about 14% were the TRx or total prescriptions are only down 8%, so the refills is by the way new to brand hurts the acute -- this is all of ophthalmology so acute care products got hurt a lot more as you might guess and glaucoma products like ours got hurt a lot less. So that's what we see there. But really I think the thing that we try to do with physicians is make sure that they know that they're supported for commercial plans we have copay cards and those sorts of things, the key people in the game and keep people refilling their prescriptions and so, we'll keep that TRxs up -- where they have been and continue to keep them growing.

[Elliot Wilbur:]

Okay, thanks. Those were my questions.

[Operator:]

Thank you. Your next question comes from the line of Difei Yang from Mizuho Securities. Your line is now open.

[Dan Clark:]

Hi, thank you. This is Dan Clark on for Difei. Was pricing in the quarter impacted at all by the Medicare coverage gap.

[Vince Anido:]

Yes, it always is and we try to estimate it as best as we can and it's always a nail biter at the end when we finally get to bill. But I think Rich and his team that handle that have done a great job this year and it came in within the loaded amount for our expectations and so we do account for it and then hopefully we don't see a huge surprise. But I think is now that we've got a few years under our belt, we are getting very, very good at estimating those rebates and we do also take into account any new Medicare Part D plans that we sign up during the year, like we did last year in '20 where we signed up, the largest Medicare Part D provider in the country, so we did take that into account and we were able to estimate that one pretty well as a result. So I think we're in pretty good shape relative to that, but net-net, the answer is yes, it was impacted.

[Dan Clark:]

Okay, thank you. And then, I appreciate the color on the percentage of doctors' offices that are currently open, roughly how does -- how does that percentage apply to your top decile prescribers.

[Vince Anido:]

Tom.

[Tom Mitro:]

Yes, we don't really break it out by dociles, but just to let you know that number we gave you are the dociles we call on. So I can't tell you 10 to 9. But we go down to decile 4, as a good examples of those numbers I gave you really were through decile 4.

[Dan Clark:]

Okay, great. Thank you.

[Tom Mitro:]

Yes.

[Operator:]

Thank you. No more further questions I would now like to turn the call over to Vince Anido, Chairman and CEO for final remarks.

[Vince Anido:]

Thanks, Jerome. Thank you everybody for joining us today. Obviously, we are very excited about the way we exited 2020, looking forward to 2021 and will provide and maintain our usual transparency as we progress through the year. We do think we are hitting on all cylinders at this point, we are growing revenues in the US on both -- on both products. And as I mentioned, both the unit, as well as the net price increase there is helping us quite a bit. We are making an awful lot of progress on our pipeline moving that forward too, so we can make major decisions about the company's future and continue to add products to our pipeline as a result, as you saw with our newest entry using PRINT technology. We are expanding our reach outside the United States with partnerships and Santen was a big one this last year, hopefully it will have a huge impact on us as well completing a European deal and for other territories later on this year and we finally did get control over our own destiny relative to manufacturing by getting our Irish facility in Athlone approved for the manufacturer Rocklatan and Rhopressa in the US and we are now supplying patients with product that we're making. And obviously as Rich has told many of you we ended up the year in a very, very strong cash position, which we expect to continue that move forward, especially as we close on a European deal. So again, I want to thank everybody for joining us tonight. Have a good evening.

[Operator:]

This concludes tonight's conference call. You may now disconnect.