ChemoCentryx, Inc.
Q1 2022 Earnings Call Transcript

Published: 5 May 2022

[Operator:]

Good afternoon and welcome to the ChemoCentryx First Quarter 2022 Financial Results Conference Call. At this time, all participants are in a listen-only mode. Later, we will conclude -- we would conduct a question and answer session. As a reminder, this conference call will be recorded. I would now like to turn the call over to Mr. Bill Slattery, Jr., Vice President of Investor Relations & Corporate Communications at ChemoCentryx. Mr. Slattery, please go ahead.

[Bill Slattery, Jr.:]

Thank you, Operator. Good afternoon and welcome to the ChemoCentryx first quarter 2022 financial results conference call. Earlier this afternoon, the company issued a press release providing an overview of its financial results for the quarter ended March 31st, 2022. This press release along with the slide deck that you may find helpful while you listen to this call are available on the Investor Relations section of our website at www.chemocentryx.com. Joining us on the call today from ChemoCentryx are Dr. Thomas Schall, President and Chief Executive Officer and Chairman of the Board, Susan Kanaya, Executive Vice President, Chief Financial and Administrative Officer, and Tausif Butt, Executive Vice President and Chief Operations Officer. Tom and Susan will make introductory remarks before we open the call to your questions. During today's call, we will be making certain forward-looking statements. As explained on Slide 2, these forward-looking statements are based on current information, assumptions, and expectations that are subject to change and involve a number of risks and uncertainties that may cause actual results to differ materially from those contained in the forward-looking statements. These risks are described in the Company's filings made with the Securities and Exchange Commission, including our Annual Report on Form 10-K filed on March 1st, 2022. You are cautioned not to place undue reliance on these forward-looking statements, and ChemoCentryx disclaims any obligation to update such statements. In addition, this conference call contains time-sensitive information that is accurate only as of the date of this live broadcast May 5th, 2022. ChemoCentryx undertakes no obligation to revise or update any forward-looking statements to reflect events or circumstances after the date of this live conference call. With that, I will turn the call over to Tom.

[Dr. Thomas Schall:]

Thank you, Bill. And good afternoon to everyone listening. Thank you all for joining us. Please move to Slide 3 in our presentation. We had an excellent first quarter of 2022. We outperformed our own expectations with U.S. net product sales reaching $5.4 million in Q1. All the key performance indicators we are tracking significantly improved over Q4, confirming we are right where we need to be at this stage in the launch. Additional regional approvals in the European Union and Canada build on TAVNEOS ' global footprint, along with launches in Germany and Austria through our partner, Vifor Pharma. Improving on our cash balance, we received a $45 million non-refundable milestone payment from Vifor following the EU approval. The $371.8 million in cash and investments, we ended the quarter with places us in a strong financial position to execute on our plans objectives. Among these objectives are advancing our novel once daily, orally administered PD-L1 checkpoint inhibitor, CCX559. At the American Association of Cancer Research, or AACR, meeting in April, we presented Phase 1 data in cancer patients that supports our belief that CCX559 could be an important next-generation cancer treatment. We also resumed plans to advance TAVNEOS as a pipeline in a drug. We expect that communications with the FDA in late Q2 will yield next steps for lupus nephritis and severe hidradenitis suppurativa. As you can see, the start to the year is marked by what we call purposeful execution that has become a trademark of our success at ChemoCentryx. Moving now to slide 4. As you know, we launched TAVNEOS in the United States in Q4, October of 2021. Today, we will review our key performance indicators for Q1 of this year. They tell us a simple and, I think, powerful story of growth and achievement. Specifically, in the first quarter, we achieved 248 new patients start forms, which is nearly double, or 195%, of the Q4 figure. We also attained over 300% of the Q4 number of patients on drug. It's 277 at March 31st, and the number of unique prescribers nearly tripled by the end of Q1. We saw continued gains in the conversion rate of new patients start forms to patients on drug, surpassing our expectations at a very impressive 74% cumulative overall launch-to-date. Now, a few words on the conversion rate. As we noted that the conversion rate is a snapshot of a moment in time. This rate will never be 100% because, for example, the simple fact that after all, people who may have got referred to yesterday may now get to fill their prescription. In addition, for other reasons, a relatively small percentage of folks never do fill their prescriptions of any meds. We do believe that this conversion rate number will continue to grow over time as it did Q1 over Q4 to a large majority percentage patients converting. And to be clear 74% is a very good rates by industry benchmarks at this stage of our launch. Ultimately, these indicators led to a us net product sales of $5.4 million in the first quarter, more than 500%, the approximately $1 million we recorded in Q4. All these metrics exceed the projections that we had modeled internally this year. They paint a robust and compelling picture that lead us to believe we're right where we need to be. A growth picture reflects this decking effect, which we believe will continue to build momentum in upcoming coming quarters. The first two components of this decking effects, let's refer now to Slide five result from increasing new patients starting treatment and patients continuing their treatments and refilling their prescriptions. The third variable now overlaid on slide six is an increase in the percentage proportion of paid patients. In the first quarter, this figure increased remarkably reaching over 60% figure which is beyond our projections at this stage. Why is 60% regarded as a very good number at this stage of our launch? Allow me to explain. First, paid patient percentage is, again, a snapshot of a moment in time. It will never be 100%. Why? Because at any given moment, you will have some patients participating in our patients support programs. These will subsequently shift to patients covered by payers. For example, our Quick Start Program is available to patients prescribed TAVNEOS so they can access products without delay. This is provided for a limited time, typically 30 days. Quick Start is designed to provide medications to patients who need TAVNEOS while reimbursement is sorted out by payers. And we'll know it, of course, that such patient support programs are as expected an intelligence feature of an orphan drug, Specialty Pharmacy distributed program. What's important is that we anticipate that at steady state percentage of paid patients will indeed be the large majority of patients on TAVNEOS. This is why we are very happy with where we are now, which is double where we were at the end of Q4. We expect the types of stepping effects described above will continue to lead to an increasing percent of paid patients and importantly, increased revenues over time as the TAVNEOS launch matures. This is the momentum that we expect to propel TAVNEOS sales into the tens and then hundreds of millions of dollars, then ultimately reaching what I believe will be a blockbuster status at its peak in the U.S. alone. To drive the increase in new patients, start forms recorded this quarter, our commercial team has focused on the top prescribing physicians responsible for roughly 80% of all ANCA -associated vasculitis prescriptions in the United States, and the majority of TAVNEOS referrals, as referred to on Slide 7. We are seeing the results of this focus and execution paying off. During the first quarter, the number of unique prescribers grew to 251, nearly three times what we reported in Q4. Moreover, the number of physicians writing prescriptions to more than one patients in their practice, that is, repeat prescribers has also increased markedly, nearly doubling from the last quarter. To complement the individual outreach efforts, we also presented at key medical conferences in the first quarter, such as the International Society of Nephrology and the International Vasculitis and ANCA Workshop. We plan to continue our engagement with the scientific community at the European Renal Association meeting, or ERA meeting, as well as the American Thoracic Society, or ATS, meeting later this month, followed by the European Alliance of Associations for Rheumatology, or EULAR, meeting in early June among others. Let's now travel outside the U.S as shown on Slide 8. TAVNEOS continues to gain traction with global regional approvals and launches in other parts of the world, led by our partner Vifor Pharma and their sub-licensees. TAVNEOS was approved in the European Union in January, and in Canada this April. Vifor recently initiated marketing activities for TAVNEOS in Germany and Austria during the first quarter, and expects to launch in other markets this year. We anticipate these global regional sales to start to develop and we remind the community that Vifor will pay ChemoCentryx royalties in the teens to the mid-20's percent on total ex-U.S. sales of one aggregate net sales line. Moving onto clinical development on Slide 9. 2022 is shaping up to be an important year for our pipeline advancement. We will be communicating with regulators our plans to advance TAVNEOS in various indications beyond ANCA associated vasculitis. This is part of our TAVNEOS pipeline in the drugs strategy. Showed on Slide 10, we are communicating with the FDA later this quarter our plans for a development for TAVNEOS in Lupus nephritis. TAVNEOS has the ability to selectively inhibit the C5a receptor without broad immunosuppression offers new volts to Lupus nephritis patients. We should add feedback mid-years and hope to initiate our clinical work here during the second half of the year. Also, later this quarter as referenced on slide 11, we plan to meet with the FDA to discuss a pivotal Phase III trial of TAVNEOS in patients with severe hidradenitis suppurativa or HS. At the upcoming May meeting of the Society for Investigative Dermatology, we will present recent CCXI research that supports a more profound role of inflammatory mediators and functions in severe forms of HS as compared to milder forms of the disease. And during the second half of this year, we intend to meet with the FDA to discuss our clinical trial results with TAVNEOS in the very rare orphan kidney disease of C3 glomerulopathy, a life threatening disease with no currently approved therapies. Let us now turn to slide 12. Our potent orally administered PD-L1 inhibitor CCX559 is currently being evaluated the first-in-human Phase I dose-escalation study in patients with advanced solid tumors. And this small molecule revolutionized cancer care in a similar way, or even beyond what approved monoclonal antibodies targeting this pathway have done. As shown on Slide 13, during the American Association for Cancer Research meeting this past April, we presented pharmacokinetic or PK, as well as pharmacodynamic or PD data on the first set of patients enrolled in our Phase I basket study. These patients had received CCX559 orally given once daily doses of 30, 60 and 120 milligrams. The AACR poster supported PK properties that were in line with our pre -clinical projections, along with strong PV evidence of immune cell activation in cancer patients dosed with CCX559. Specifically, we found the following; evidence of very good oral absorption of CCX559 and then a dose proportional function evidenced the pharmacological activity at all those tests. Evidence that the 120 mill once a day dose is therapeutically relevant. Reproducible evidence for immune system activation, including so-called one responses, which are known to be correlated with anti-tumor efficacy at the 120 meg once daily dose and a very good tolerability profile of the drug. We expect to report further clinical findings throughout the year. Starting with the American Society of clinical oncology or ASCOT meeting in June. At ASCOT, we intend to describe some findings of what have been called immune response related adverse events or IR In the trial to date, which are in fact a good side with immune cell checkpoint inhibitors and well-known to correlate with effective antibody-based checkpoint inhibitor currently approved for cancer therapy. Also, while noting that many of the tumor types in the present dose escalation trial do not involve the PD-L1

[Susan Kanaya:]

Thank you Tom, our first quarter, 2022 financial results were included in our press release today, and are summarized on Slide 14. TAVNEOS U.S. net product sales were approximately $5.4 million for the first quarter ended March 31, 2022. More than five times the approximate $1 million reported in the fourth quarter of 2021. Collaboration revenue was $0.1 million for the first quarter of 2022 compared to $10.2 million for the same period last year. The decrease in collaboration revenue was attributable to the $10 million uptown we received from Vifor in 2021 for the acceptance of the Japanese NDA for TAVNEOS in the treatment of ANCA-associated vasculitis. In accordance with 606 collaboration revenue is recognized ratably in proportion to actual costs incurred as a percentage of total programs budgeted costs. As we complete our performance obligations under the avacopan upgrade and specify for the 45 million non-refundable regulatory milestone received upon TAVNEOS approval in Europe is indeed reflected in our Glenn balance sheet, but will be recognized as collaboration revenue is steam from product sales over an estimated four-year period, subject to periodic adjustments. Cost of sales for the first quarter ended March 31, 2022 was $0.2 million. As a reminder, cost incurred for manufacturing campaigns initiated prior to the October 2021 FDA approval of TAVNEOS were recorded as research and development expense. Accordingly, cost of sales in the near-term is expected to be lower than in later periods until we clear from the pre -approval inventory. Research and development expenses were $17.5 million for the first quarter of 2022, compared to $23.4 million for the same period in 2021. This decrease was primarily attributable to manufacturing costs of commercial drug supply in the first quarter of 2021, along with lower clinical trial expenses. Selling, general and administrative expenses were $26 million for the first quarter of 2022, compared to $16.3 million in the same period in 2021. The increase was primarily due to higher employee-related expenses and professional fees, including those associated with the TAVNEOS U.S. launch and commercialization. Net loss for the first quarter of 2022 was $38.6 million compared to net loss of $29.7 million for the same period last year. Total shares outstanding as of March 31, 2022 were approximately 71.1 million share. Lastly, we ended the quarter with cash, cash equivalents, and investments totaling approximately $371.8 million as of March 31, 2022, which includes the $45 million milestone previously discussed. Tom.

[Dr. Thomas Schall:]

Thank you, Susan. Moving to Slide 15. This has been an excellent start to 2022, an excellence start. To summarize, TAVNEOS net product sales increased more than fivefold. And we outperformed our own expectations for Q1 on each of our key performance indicators, including new patient start forms, patients on drug, unique prescribers, and repeat prescribers. Outside the U.S. that were approvals in the EU and Canada, along with commercial launches by our partner Vifor Pharma in Germany and Austria. We expect to interact with the FDA later this quarter to discuss plans and lupus nephritis, severe hidradenitis suppurativa with clinical trial initiations for both indications. Plan during the second half of the year. We also plan to meet with the FDA later this year to discuss C3 operating. The early data from our first in human studies provide evidence of the benefits that are once-daily, orally administered. PD-L1 inhibitor CCX559 could bring the cancer care. We expect to present more data and initiate an expand trial later this year. And we have the financial engine to drive forward on all this of confidence. I alluded to tumultuous market times in this ecosystem that is biopharma, I guess it's worth reminding ourselves that sometimes conditions must bury themselves deep before they bloom. The advantage here at ChemoCentryx in my view, is great science has already germinated into a great medicine. Rest assured, we intend to continue to grow and harvest a tough, bountiful, and bright bumper crop, our garden of innovation. With that, I'll thank you all very much in turn the call over to the Operator for your questions. Operator.

[Operator:]

. Please stand by while we compile the Q&A roster. Your first question comes from the line of Joseph Schwartz. Your line is open.

[Joseph Schwartz:]

Hello.

[Dr. Thomas Schall:]

Hello, Joe. We can hear you now.

[Joseph Schwartz:]

Excellent. Congratulations on the strong launch. I was wondering if there was any inventory stocking in the quarter and if you can give us a sense of the proportion of patients on drug that were paid as of the end of the first quarter. And then I have a follow-up.

[Dr. Thomas Schall:]

Sure, Joe. The inventory stocking is not a big feature of what we're talking about. Each quarter, you should expect a limited channel supply for our agreements with specialty distributors and specialty pharmacy selling TAVNEOS. But they typically maintain approximately two weeks supply on hand in line with other rare disease products. As I may have alluded to as of March 31st, 277 patients are on drug, of which approximately 60% were on paid medication. So that's a significant and model, I think we're very happy with the model that's performing, model uptick from where we were in Q4.

[Joseph Schwartz:]

Great. That's super helpful. Thank you. And then can you provide any additional color on the real world pricing of TAVNEOS? How should we be thinking about the price on a gross and net basis?

[Dr. Thomas Schall:]

Yes. We're still quite early in the launch, but our goal has been to increase, especially education about TAVNEOS, help get it to patients, certainly get people into the program through Quick Start, etc. We're also working very carefully leveraging patient support group programs that we've implemented to help, again, appropriate patient access to treatment while working through the reimbursement process. All those things are going really well and I think we're right where we remodeled to be, in fact, exceeding our models. So our wholesale acquisition cost for a 30-day supply is $14,450. And we've said before this, we believe, reflects the value and certainly in line with rare disease pricing. Where we will talk a little bit more about the overall gross to net discussions as the launch matures a bit more, we're also sensitive to the fact that gross to net means different things to different people. As we are able to, again, mature the launch, and be able to talk globally about that concept, we'll be happy to do so. But I'll just stress again, through March, the percent of paid patients on drug comes substantially to 60%, And I was quoted at the end of Q4 as saying they were over -- over 1/3 were paid drugs. As you can see, we're making great strides there. And again, right where we're modeled or we would like to be. And it's taking an average of less than four weeks or so to reach payer approval. All the metrics in our model are going in the right direction. In fact, either right on or exceeding our expectations at this point.

[Joseph Schwartz:]

Great. That's really helpful. Thanks for the added information.

[Operator:]

Your next question comes from the line of Steve Seedhouse from James Raymond, oh, sorry, Raymond James. Your line is open.

[Ryan Deschner:]

Hi, guys. This is Ryan Deschner on for Steve Seedhouse. Congratulations on the launch so far. I wanted to ask if you could provide any additional details on sales guidance for the year or at least how growth trends have continued through April and May as far and a follow-up.

[Dr. Thomas Schall:]

Well, we are again, we're really keen on focusing on our key performance metrics and showing an increase quarter-by-quarter. I believe fundamentally, we've got a very strong launch going now. I think those trends will continue. Today, we're really hyper-focused on the great first-quarter that we posted. Again, we're extremely pleased with the nearly or actually more than five times increased revenues to $5.4 million. We were very pleased that new patients start forms grew to 48 nearly twice what they were at the end of Q4. We were extremely pleased with the 277 people on drug -- patients on drug, three times what we reported in Q4, and we nearly tripled the number of unique prescribers and doubled. I'm sorry, the number unique prescribers, yes, nearly tripled -- I mean nearly doubled the repeat prescribers. Now I underscore all those points because again, it shows you are launch plan, our trajectory and where we intend to keep this launch going over time. So you can expect quarterly calls to report quarter-to-quarter. We'll be able to update you on all these metrics. And we'll be happy to provide details of the upcoming quarter on our next call. So all I can say it's again, strong launch trajectory. We're feeling very strong about where we are, very good about where we are.

[Ryan Deschner:]

Great. And just one more quick one. I was wondering how patient persistence have been looking like so far. And are you finding patients staying on through remission and beyond? Thanks.

[Dr. Thomas Schall:]

Well, it's still early days, so we don't have a lot of data. But what we can tell you is this. The healthcare providers and indeed the -- many of the sophisticated parts of the patient population are very aware of the data that we published in our advocate pivotal trial. They're super aware that we demonstrated that TAVNEOS was superior in sustaining remission over the standard of care and durable remission up to 52 weeks. So I think that we have seen a great deal of interests and keeping people on therapy as long as they are benefiting from the drug and tolerating the drug very well and as again, the usage matures over this first year we're going to see again what the real world data is telling us. But I haven't heard of any -- I haven't heard of any movements at this point to do only short-term therapy. In fact, quite the opposite, most of the discussions we've been having are how long should people say on therapy. Again, we quote from our blinded data in our trial, which was a long trial frankly, and disease like this. And we point to any publications in the literature about extended compassionate use programs and so on, which go out some degree farther than 12 months. But right now, too early to say from real-world data, post-launch.

[Ryan Deschner:]

Thank you very much.

[Operator:]

Your next question comes from the line of Yanan Zhu, your line is open, from Wells Fargo.

[Yanan Zhu:]

Hi. Thanks for taking my questions. And I wanted to add my congratulations to a great launch momentum. Indeed, our doctors check has shown that doctors do like the drug and are satisfied with the use and great to see that it's reflected in these strong numbers this quarter. I wanted to ask about the growth question from maybe another perspective. I think in January with the numbers you provided, in January there were about 50 new patients start forms. Given that you now have roughly 250 new patient start forms for the quarter, that really means that February and March delivered a phenomenally better and greater numbers than January. I wanted to ask, how are those numbers distributed between February and March? And if there is a line of increase, for example, 50s and 80s and 120 and that will add up to roughly 250, but that would give a line of increase from 80 to 120. And obviously in April, it could be on that rate that will be -- continuing to be of great increase. Obviously you have insight to April numbers. So I just wanted to overall to ask you the growth perspective. Because the other possibility is February and March have similar numbers, both 100 and that would point to a different picture. So Tom, to extent possible, could you talk about your confidence for continuing to grow this new patient add number? Thank you.

[Dr. Thomas Schall:]

Yes. I'm confident, look our model obviously suggests that we continue to increase quarter on quarter until we get to peak and make no mistake. I've said this publicly. I'll say it again. I believe at peak in the United States alone in Anca Vasculitis alone. This drug is blockbuster potential. So obviously meaning to show growth quarter-by-quarter. The growth will be shown both with new patients starts, patient on drug. Paid patient percentage continued to increase, as I said in my remarks, until the large majority of folks on paid patients and those stepping effects that I alluded to in the two slides of the deck that I showed, will contribute to the growth curve as well. We presented the January data almost out of, I don't know, a sense of thoroughness and courtesy to the investment community. We realized that kind of data can be misunderstood misinterpreted. So we won't be doing that anymore. We're going to present quarter-by-quarter data and we believe that's the appropriate way to talk about the launch. But I am very confident again of our model, of our growth curves and the fact, as you mentioned at the top of year remarks, physicians are giving very positive feedback on this drug as are patients. So it is finding its niche and we're going to continue to find ways to make sure it finds its niche with all appropriate patients as we go forward and that will lead us eventually the blockbuster potential.

[Yanan Zhu:]

Thank you, Tom. Great to hear those remarks. And I also wanted to ask about the insurance coverage situation. Of course, you have a great number or proportion of patients now on paid drug. However, I was wondering could another growth be actually a broader payer coverage? Because even though it -- now you have 60 patients on paid insurance plans, but doctors may have only given you the patients that they know have good insurance. So there could be a potential if the insurance coverage broaden, doctors will have even more patient to write the drug for. Because I think even though you have a free month -- one-month free supply, doctors think more holistically and they think about if this is a long-term treatment, they probably -- some of them wouldn't start without have the insurance line up. My question to you is, what is the current insurance coverage? And how do you see that the evolve at peak? What insurance coverage could we get? Or -- I wanted to add one more small question there that is, have you been seeing pushback like the price is too high, things like that from the insurers? Thank you.

[Dr. Thomas Schall:]

Very important issues. And you're so right at this point what really matters are that physicians, not only think the drug is very good, very powerful, but they're also having success in getting patients on treatment, the obtaining of prior authorizations, and in some cases where necessary even successful appeals. All of that has been going a lot better and will continue to get smoother as we get through the process of additional payer discussions. We're very pleased that on average it's taking 4 weeks or less to reach payer approval. That's an improvement over the four to six weeks we noticed in Q4 that I reported at the time. So again, that trend is going really well. Frankly, what we're doing, and I think the discussion with payers have been productive, again, and the initial feedback from physicians suggest that they are getting success in obtaining reimbursement for appropriate patients who meet the criteria outlined in the label. So I think that you're quite correct. We continue to work month by month with payers. We continue to bring more online each quarter and we'll continue to do so. And by the end of this year, I am quite convinced that we'll have the majority of folks covered under paid insurance in a decree authorized way with published established peer authorization criteria, etc. Those have been very productive. We'll be talking more about the numbers as we go forward this year. But I think we're pretty pleased even with where we are now in getting both coverage and importantly, reimbursement for these folks.

[Yanan Zhu:]

Great. Thanks for all the color.

[Operator:]

Your next question comes from the line of Dae Gon Ha from Stifel. Your line is open.

[Dae Gon Ha:]

Good afternoon guys. Thanks for taking our questions and let me my congrats on the profound quarter congrats. I'll leave a lot of the commentary to you guys and go quick to the question. Two questions from me. One on the unique prescribers being 281, can you maybe give us a little bit more color on the disposition of those as it pertains to the top specialist in the U.S. of approximately 400 versus the community specialist of the 3,000 number that you gave in your slide. And secondly, we did a survey and it seems like things seem to be improving with COVID abating. But I just wanted to kind of get a sense for how we should think about as we enter the summer months and COVID seems to be abating, but in fluxes. Different geographies seem to be implementing different policies. So how should we think about that? Thanks so much and congrats.

[Dr. Thomas Schall:]

Yes, thank you, Dae Gon. It's a very good set of questions, important questions. What we're doing right now is we're clearly trying to focus intensively on those top 400, but we're really looking holistically at the additional 3000 community specialists that make up 80% of the market overall. So we're seeing a growing number of unique prescribers and referrals coming from both the academic centers of excellence, where most of the 400 specialists reside, as well as the community specialists do. So it's clearly within that 3400 we're refining most of the action right now, which is encouraging. Now you're so right about COVID, I mean the centers of excellence in January were largely not accessed. In fact, us in-person visitations across the board from medical science liaisons and sales reps, dip to under 40%. We were able to get that to be above 60% in recent times. So we're moving in the right direction. And that we believe will open up more of the prescribing potential again at the centers of excellence where most of the 400 of KLLs prescribed. We're seeing a healthy number of those doing very good work in the KOLs population, the Top 400. But as we get more access we can discuss with them more directly the program does more medical education. And quite frankly, help them understand how to ease their office's access to getting the patients the drug. I think that's going to help accelerate even more now that those centers are opening on.

[Dae Gon Ha:]

Great, thanks so much.

[Operator:]

Next question comes from the line of Anupam Rama from JPMorgan. Your line is open.

[Anupam Rama:]

Thanks so much for taking the question and congrats on the good early start to the launch year. Two quick ones. The first one following on the Last question at the 281 prescribers, can you give us sense of the breakdown between thing Nephrologists, Rheumatologists, other physicians. And then second question on your cash position, are you expecting any more milestones in 2022? And what is your current cash position sufficient to? And what does it assume?

[Dr. Thomas Schall:]

Sure thing, Anupam. I'll take the first part of the question and I'll put the second part over to Susan Kanaya. With the prescribing physicians, the breakdown is interesting. It's about 60 -- a little over 60% rheumatologists, maybe about 25% nephrologists, I'm going to put an asterisk by this distribution in a moment for rheums and nephrologists, and 15% other, where other includes pulmonologists and ENT specialists, that kind of thing. So that shifted a little bit from what we talked about in Q4, but not that much. Now the thing the asterisk there is referring to, is that we're finding more and more that a lot of these folks are seen both by a rheumatologist, who can really be considered their primary care physicians, and by a nephrologist when they develop kidney manifestations. So they'll see the nephrologist, they may even decide to get on TAVNEOS as a consequence of declining kidney function, but often time in the team care approach, the rheumatologist will actually write the prescription. So it's -- we're still go -- trying to dig a little bit deeper in where the actual motivation for the referrals come from. But it is, generally speaking, again, about 80% to 85% rheumatologists and nephrologists prescribing the bulk of TAVNEOS right now, and 15% other. As regards our cash position of $371.8 million in cash and cash equivalents, I will put that back to Susan Kanaya. Susan?

[Susan Kanaya:]

Thank you, Tom. And thanks for your question on COM. So outside of the $45 million milestone that we reported today, we don't anticipate any significant additional milestones in 2022. However, we'll be eligible of course, to receive our royalty in the teens to mid-twenties on the Vifor territory aggregate net sales. In addition, I'll remind you that there are approximately $295 million in potential aggregate milestones upon reaching certain annual net sales thresholds under our agreement. So again, very well-positioned today with the $371.8 million that we've reported and believe that our reserves put us in a very strong position to execute across our commercial and clinical strategy that we discussed today. Thanks so much for taking our questions.

[Operator:]

The next question comes from the line of Michelle Gilson with Canaccord, your line is open.

[Michelle Gilson:]

Hi, thanks for taking my question and I'll add my congratulations on the quarter. It's been great to see the acceleration in the launch. Given the acceleration patients, as you've seen. I'm looking at my numbers that looks like a little north of 35% growth in the rate that you're adding patients on drug. Here from the January numbers you provided, do you expect that trend to really be continuing at the same rate, moving into the second quarter and then what are some of the leverage you can call to get more patients on drug?

[Dr. Thomas Schall:]

Michelle, we're doing our level best to make sure we continue to increase quarter-on-quarter in the important metrics. We really do want to make sure we get more of an increasing new patients start forms quarter-by-quarter. And that's one of the big levers. We want to make sure that conversion rate I'll come back to that leverage in a moment. We want to make sure that conversion rates continue to increase till we get to the large majority we're already majority 74% make sure they're converting. And we want to continue with especially the stacking effects I alluded to earlier, while we'll never have 100% rate of paid patients on drug. We want to have that again, VITL, large majority of the large fraction on paid patients, and it ought to be. And we're going in exactly the right direction. We're very happy with all those things building in the right direction. The levers really involved access in two ways and education that comes with access. For example, two-years of COVID has had a big impact on how drugs are talked about. New medicines are marketed and education around those medicines, especially at centers of excellence, not exclusively but especially. We'd love to be able, there's no substitute for in-person interactions, both with medical science, education, as well as the ability of sales reps to talk about the product and appropriately lay around the label. So we hope that that will start to open up. In the meantime, though, we've redoubled our efforts to try to meet the physician where they want to be met and how they want to be met. So we expanded our digital footprint, expanded the ways we can do some of these programs. Really taken in suggestions from the medical community about how to make sure they are more aware of TAVNEOS and understand what they need to know. Some access in education on the healthcare practitioner side is one big lever. And we're trying to push and pull that lever as appropriate as we can, as. we've learned more and more about how to work with a brand-new high science product like TAVNEOS in this current environment. The other side is on the patient side. And again, using hopefully appropriate ways, not hopefully, but definitely using appropriate methods, we'd love to be able to help patients have better, more thorough conversations with their healthcare practitioners about the properties of TAVNEOS, the data, and what it may -- might mean for their particular condition. These are really motivated patients in the ANCA world. They haven't always had much to organize around frankly. So we're hoping that we can help them again with appropriate educational access about not just their disease, but the mechanism of action of this drug. And again, how they might have intelligent conversations with their -- their doctors about what this drug may or may not mean in their particular case. So that's something we're working on very much. And then and I guess finally, peer-to-peer discussions, especially in and around major conferences, to the extent that again, we can appropriately encourage those or make those forums available to allow peers to talk to each other about their experience with TAVNEOS today. I think that's going to be very powerful because many of those anecdotes are extremely interesting, extremely moving. And I'm hoping we'll start hearing a lot more of that at upcoming meetings like European Renal Association at EULAR. And then of course a little later on at PRA. I'm sorry, ACARNS here in United States, but access and education both on the physicians and patient side, I think those are big levers.

[Michelle Gilson:]

Okay. And what are you hearing about, I guess from your sales organization, in terms of I guess the key areas of push back, in the areas that you are having to do the most work to educate physicians around for starting TAVNEOS. Either that -- to getting that first prescription?

[Dr. Thomas Schall:]

Yeah. That's a really good question. In general, the good news is that physicians are very quick to pick up the TAVNEOS, what I call therapeutic value proposition. That's important because they do realize -- and I think the awareness of what we showed in the advocate trial is fairly high. Not perfect yet. There's still a lot of questions around glucocorticoid use and how to start TAVNEOS. And the answer is, if you have a patient that fulfills the description on the label with that distributor's ease, you start it right away. You don't have to do anything else with bells and whistles around the other -- the background therapy. You use it with whatever the background therapy is you deem appropriate for that patient. So that's been a set of questions, and those have been very good discussions. Many discussions early on surrounded accessing the medication. How do I start TAVNEOS? How do I get it? How do I -- how long do I use it? Again, those have been very productive discussions. And more and more, the medical part of that discussion is happening peer-to-peer, which is wonderful. So I think that those are the kinds of things we were looking at early on. We got a lot of very important and productive input. We've acted on that input. And I believe fundamentally, the path to getting the medication to the appropriate patients has become a lot easier, and physicians are understanding more and more that they have a great deal of discretion on how to start TAVNEOS. But the answer is they don't really have to wait. If they have a patient that fits the label, they could get TAVNEOS on them right way.

[Michelle Gilson:]

Okay. And if I can squeeze one more quick one in here. Can you give us a better sense of, I guess, the percent of patients that are on paid drug that have already been through the four weeks of free drug?

[Dr. Thomas Schall:]

Well, I'll first this, not -- people say everyone gets free drugs in the first three days. That's not true. A lot of people now, especially as things are getting more and more developed, a lot of people go direct to pay drug. So that is not an insignificant fraction, and it's a growing fraction. So that's great. So what we've been also reporting obviously is the pay drug percentage, which as I mentioned is a little over 60% now that's up markedly from the end of Q4. Now, as I mentioned, but it's fair repeating that 60% is a good number -- at this point of launch a very good number. Will it ever be 100%? No. And again, it's a snapshot of a moment in time. Even if every single person got to pay drugs to be a paid patient, at any given moment, you might have referrals that are not yet on paid drugs. You will probably always have some Quick Start people in the equation. But as a proportion of the overall population on our drug, they will become smaller and smaller as a proportion and the proportion of paid will get greater and greater such that the percentage will go from now 60 to some higher number we hope quarter-to-quarter and in fact, at steady-state should be the large majority of people. What we're finding is, as you can well imagine, even from the inferential evidence, to go to 60% paid at this snapshot in time that I'm just reporting from about -- from over 30%. I was misquoted at Q4, but let's just say over 30% at Q4, you can see that clearly that the folks are getting on paid drug faster, fewer are getting even Quick Start, they're going direct to pay. And overall the stacking effect of folks that are in the funnel, in the system, if you will and then getting their prescriptions refilled under paid plans is greater. All that is to the good.

[Michelle Gilson:]

Okay. Thank you so much for taking my questions. Congratulations again on the quarter.

[Dr. Thomas Schall:]

Thank you, Michelle.

[Operator:]

Your next question comes from the line of Edward White of H.C. Wainwright. Your line is open.

[Edward White:]

Good afternoon, Tom, Susan.

[Dr. Thomas Schall:]

Good afternoon, Ed.

[Edward White:]

So I guess most of my questions were answered already. I just have one follow-up on the in-person detailing. You had said it dropped to under 40% in January and up to about 60% recently. What was it in the fourth quarter, and do you see that trajectory growing in the second quarter and beyond? And then perhaps another question on the sales force, do you think the sales source is right-sized now? Or do you think that you need to add more field reps to increase penetration?

[Dr. Thomas Schall:]

Ed. In the fourth quarter, the in-person detailing hovered around 50 -- somewhere between 45% and 50%, then it took a dip in January to below 40%, which was pretty dire. And then it's gone back up as I said, to approximately 60%. We hope it's continuing to grow. It will take time for this healthcare system to sort out the effects of COVID. I don't think we're going to go from, 60 to 80 anytime soon. That's for sure. They're still working through their staff shortages. They're still working through other procedures. As a consequence of COVID hangover, if you will. So that that's something to remember, but we are hoping that these increased in-person visits will result in greater efficacy of the ability to educate and get the drug out to people. Now, I had your other question in mind. I've lost it. What was the second part of your question?

[Edward White:]

Here is the question, It's the sales force bright.

[Dr. Thomas Schall:]

Thank you forgive me. I jotted it down on a piece of paper that I am bury. Yeah. Look, we've done we did a lot of work on modeling the field force size prior to launch. I think that research was very, very thorough. We believe that this time we're probably well within the range of our research. Having said that, we, we are looking at it literally week-by-week get at when we find a need to adapt If there is such feed, we will do so. But right now, I do think we're covering the situation very well, the early returns are very good, and again, the Q1 numbers speak for themselves with fivefold increase in revenue, the ability to treble if you will the number of unique prescribers. The fact that our conversion rates are good, the fact that again we nearly doubled the patients on drugs. I think we're making good progress. We're tracking in excess of the optimistic parts of our model, if you will, but we will continue to go where the data to take us. And if we need to change the size of the field force, we will not hesitate to do so.

[Edward White:]

Well, thanks for taking my questions.

[Dr. Thomas Schall:]

Thank you, Ed.

[Operator:]

There are no further questions at this time. Please continue, Mr. Tom.

[Dr. Thomas Schall:]

Well, thank you so much. That was a very stimulating discussion and set of questions. I very much appreciate everyone joining our call today. I very much look forward to talking about our progress at our next quarterly call. You may now disconnect. Thank you and good evening.

[Operator:]

This concludes today's conference call. You may now disconnect. Thank you.