Global Blood Therapeutics, Inc.
Q2 2020 Earnings Call Transcript

Published: 6 Aug 2020

[Operator:]

Greetings, and welcome to the Global Blood Therapeutics conference call. [Operator Instructions]. As a reminder, this conference is being recorded. I would now like to turn the call over to Stephanie Yao. Please go ahead.

[Stephanie Yao:]

Thank you, and welcome to the GBT conference call to discuss the company's financial results for the second quarter 2020 and to provide a business update. I'm Stephanie Yao, Senior Director of Investor Relations and Corporate Communications. Joining me on the call are Dr. Ted Love, our President and Chief Executive Officer, who will provide an overview of the progress in the second quarter; then Jeff Farrow, our Chief Financial Officer, will provide an overview of our financial results. He will be followed by David Johnson, or DJ, our Chief Commercial Officer, to give an update on Oxbryta's launch. Ted will then provide an update on our research activities and other long-term growth initiatives. Earlier this afternoon, we issued a press release announcing GBT's business progress and financial results for the second quarter ended June 30, 2020. Before we begin, I would like to remind you that certain statements we make on this call that are not historical facts may be forward-looking statements that are subject to risks and uncertainties. Information concerning factors that could cause actual results to differ materially from those expressed or implied by such forward-looking statements are contained in our SEC filings, including, but not limited to, our most recent quarterly report on Form 10-Q as well as in today's press release. Copies of our SEC filings and press releases can be obtained from the Investors page of our company website at gbt.com. The forward-looking statements made on this call are only as of the time they are made and should not place undue reliance on such statements. Future events or simply the passage of time may cause our beliefs to change, and we disclaim any obligation to update any forward-looking statements other than as required by law. With that, I will turn the call over to Ted.

[Ted Love:]

Thank you, Stephanie, and good afternoon, everyone. GBT had a strong second quarter as we advanced the launch of Oxbryta and remain steadfastly focused on getting our disease-modifying therapy to patients. We are accomplishing this against the backdrop of an unprecedented global pandemic that has been felt more acutely by SCD patients who are at an increased risk of severe illness and death from COVID-19. The pandemic has impacted patients' ability to conduct daily activities, meet basic needs and secure access to health care. At GBT, we are approaching the current environment head on with a deep passion and commitment to serving the SCD community. It is more important than ever that SCD patients have access to care they need and deserve, including access to innovative new therapies, like Oxbryta. As such, we are excited that more patients are starting on Oxbryta and that we are receiving positive feedback from across stakeholders. During the second quarter, we continue to make progress with 3 key factors for our launch, including a continuation of trends from the first quarter that give us confidence in our positioning and growth potential. Number one, despite the impact of COVID-19, there was strong demand for Oxbryta in the second quarter. The reduction in inpatient visits due to COVID-19 was partially offset by physicians increase in telemedicine. The impact on new prescriptions was less than we initially expected, and we are pleased with the interest we are seeing from health care providers and patients. We are pleased to see that Oxbryta is being prescribed by broad -- to a broad range of patients, which DJ will discuss in more detail. Number two, our field teams are utilizing virtual tools to engage with health care providers and in limited cases have started in-person engagements. This translated into more first time Oxbryta prescribers in the quarter. In addition, our data indicates that a nice mix of health care provider types are prescribing Oxbryta. And finally, number three, our payer meetings are on track, and more than half of all lives are now covered through published decisions or medical exception. We continue to believe we will meet our goal of broad payer coverage by the end of the year. We are encouraged that the environment for our launch improved over the quarter, including a growing use of virtual tools that we believe should soften the impact of a potential second wave of COVID-19. While all of us are better equipped to deal with COVID-19 than when it first struck, it still presents a significant ongoing challenge, particularly in geographies with high prevalence of SCD. Many states and local communities are experiencing an increase in new cases, which has led to increased caution surrounding in-person interactions by health care providers and patients. We are closely monitoring infection rates across the country, with a focus on the south Texas and California. The health and safety of patients, health care providers and our employees will always be our highest priority, and we will continue to adapt our activities with this as a guiding principle. However, based on our progress, we are confident that the pandemic will not impact Oxbryta's long-term potential. Overall, we are happy with our launch progress to date. GBT delivered strong performance in the first half of the year and has exceeded expectations. We are executing on plans to expand the number of patients whose lives we can potentially change, and our entire team is focused on delivering for the SCD community. With that, I will turn the call over to Jeff to provide an update on our second quarter results.

[Jeffrey Farrow:]

Thank you, Ted. GBT delivered strong results in the second quarter, and we've continued to maintain a healthy balance sheet. Total net revenue for the second quarter of 2020 was $31.5 million, resulting from sales of Oxbryta. This compares to $14.1 million in the first quarter which represents a $17.4 million or 123% sequential increase. Second quarter revenues were driven by strong underlying patient demand as well as good early payer coverage, including through medical exceptions. Additionally, our gross to net adjustment was 13% in the second quarter, which is lower than we anticipated at a future steady state. The gross to net adjustment each quarter will be driven by patient insurance coverage, prescriptions filled by 340B pharmacies, the Medicare Part D coverage gap and patient copay assistance. As previously stated, we anticipate that over time, our gross to net will stabilize at around 25% to 30% once we reach our expected payer mix. Cost of sales for the 3 months ended June 30, 2020, was $377,000. Cost of sales was low in the second quarter as the majority of the manufacturing costs related to Oxbryta sales were incurred prior to FDA approval and thus were recorded as R&D expense. We expect that the cost of Oxbryta sales as a percentage of revenues will increase in future periods as fully expensed product manufactured prior to FDA approval is utilized. It is important to point out that we believe that we have enough commercial supply of Oxbryta to sustain estimated patient needs into late 2021. We continue to manufacture Oxbryta tablets and our production plans have not been impacted by any COVID related closures or delays in our supply network. R&D expenses for the second quarter 2020 were $34.1 million compared with $36 million for the same period in 2019. The decrease in R&D expenses in 2020 was primarily due to lower manufacturing costs for Oxbryta that were expensed to R&D. Following the approval of Oxbryta by the FDA, we now capitalize manufacturing to inventory. The decrease in R&D expenses was partially offset by increased costs related to the development of inclacumab and other preclinical research activities and increased employee costs. Sales, general and administrative costs for the second quarter of 2020 were $49.1 million compared with $24.8 million for the same period in 2019. The increase in SG&A expenses was primarily due to increased employee-related costs, including noncash stock compensation and increased professional and consulting services associated with the build-out of our commercial operations and launch of Oxbryta. Net loss for the 3 months ended June 30, 2020, was $52.8 million compared to $57.3 million for the same period in 2019. Basic and diluted net loss per share for the 3 months ended June 30, 2020, was $0.86 per share compared with $1.01 per share for the same period in 2019. We ended the second quarter with a strong balance sheet and with cash, cash equivalents and marketable securities of $574.2 million compared with $615.2 million at March 31, 2020. We continue to believe that our existing cash and investments, along with access to the additional $75 million under our term loan facility, have the potential to provide the necessary runway for us to achieve positive cash flow while enabling ongoing advancement of clinical development programs and other earlier stage product candidates. I will also highlight today that we filed a shelf registration statement with the SEC. I want to clarify that we have no near-term plans to use the shelf, and this filing is purely a good housekeeping matter as our existing shelf was due to expire this month. We remain confident that we are operating from a position of strength, and we will continue to execute on our plan to get Oxbryta to patients. With that, I will now turn the call over to DJ for an update on the Oxbryta launch.

[David Johnson:]

Thank you, Jeff. Good afternoon, everyone. I'm excited to provide another update on the launch of Oxbryta. We made good progress in the second quarter, minimizing COVID-19 disruption to our launch by successfully transitioning to a virtual working environment by prioritizing the safety of our team and the communities we serve. I will start by providing an update on the 3 key metrics that, combined with net revenues, will give you further insights into our progress. These metrics are new prescriptions for Oxbryta, which informs underlying patient demand; the number of health care providers prescribing Oxbryta, which captures the progress we are making in adoption; and payer coverage, which speaks to the access environment for Oxbryta. First, new prescriptions. There were approximately 1,000 new prescriptions for Oxbryta during the second quarter. This result is in line with our expectations for new prescriptions to be lower due to COVID-19. However, we are encouraged to see that the decrease in new prescriptions appears to have stabilized in the second quarter to an approximately 40% decrease from the first quarter levels. We believe the stabilization is in part due to the adoption of virtual interactions and telemedicine that is taking place broadly across the SCD community. This stabilization has so far continued into the third quarter. And given the uncertainty with COVID-19, it's possible that this trend will continue through the rest of the year. While we are encouraged by our recent market research, which shows that 100% of SCD health care providers surveyed have adopted telemedicine in some form, there are limitations. For example, some physicians are not comfortable starting an SCD patient on a new therapy until they have an in-person office visit. And when an in-person appointment is arranged, our research shows that it is not uncommon in the COVID-19 environment for the patient to postpone or cancel the appointment. With this in mind, we have a number of initiatives to support virtual interactions between health care providers and patients and between providers and GBT. During the second quarter, we deployed our first branded digital visual aid materials, providing a valuable resource for use in virtual engagements with health care providers. And in July, we launched our branded health care provider website. On the patient side, we launched our branded direct-to-patient marketing campaign. This includes a variety of targeted digital communications, which will be augmented by additional campaign tactics in the second half of the year. While it is still early in this rollout, we are encouraged that a recent patient survey indicated there is already strong interest in Oxbryta, with nearly 3/4 of respondents who are not taking Oxbryta, stating that they are likely to ask their health care provider about it. Overall, we are working to maximize our launch potential during the COVID-19 and beyond, and we expect that over time, the number of new prescriptions will further improve and surpass pre-COVID-19 levels. Similar to the first quarter, the vast majority of new prescriptions were enrollments in GBT source, our high-touch patient support program that provides a wide range of real-time and practical support, including education and financial support that's customized to each patient's needs. We are pleased that the time from prescription enrollment in GBT source to a patient receiving medication is decreasing over time to around 15 days by the end of the second quarter. In addition, early data shows that refills are happening on time for the vast majority of patients which speaks positively about compliance. In order to get more granular data on the patients who are being prescribed Oxbryta, we conducted a review of patient charts, claims and lab data. Importantly, our analysis of more than 1,000 Oxbryta patients showed that almost half of the patients started therapy with a baseline hemoglobin greater than 8 grams per deciliter, and more than half are on combination therapy for SCD. Interestingly, Oxbryta is being broadly used in patients who are experiencing a significant rate of vaso-occlusive crisis with nearly half experiencing 3 or more VOCs in the prior year. And finally, Oxbryta is being widely used to treat patients across all ages 12 and older. The results demonstrate that Oxbryta is being prescribed to a broad range of patients, which we believe is a positive indication of its growth potential as adoption expands. Now I'll turn to the second metric, health care provider penetration, which is driven by our ongoing engagement with physicians. We are achieving between 500 and 600 customer field interactions per week with our sales team, and most of these are virtual. While this is below the pre-COVID-19 in-person levels, it does represent an improvement during Q2, we expect this metric to further improve over time, especially as health care providers continue to become more accustomed to virtual engagements. We believe our virtual activities are having a positive impact on awareness and interest in Oxbryta and that we will be able to reach a growing number of health care providers this way. Our latest market research conducted in June indicates that aided awareness of Oxbryta among top SCD specialists remains above 90%, and overall awareness continues to increase as well. Additionally, we continue to see strong interest in Oxbryta, with over 90% of physicians indicating they will use Oxbryta in their practice and nearly 60% indicating they plan to initiate Oxbryta within the next 5 months. Since launch through June, our therapeutic specialists have reached approximately 86% of our highest decile physicians and overall reach 55% of the approximately 6,000 health care providers we are targeting in the United States. Our team has engaged our highest decile targets an average of 7x and has had nearly 34,600 total customer interaction since launch. All of our launch efforts have contributed to achieving approximately 920 unique health care providers who have written a prescription for Oxbryta from launch through the end of the second quarter. This includes approximately 260 new prescribers in the second quarter, during which we were limited almost entirely to virtual interactions. This demonstrates the interest and demand for Oxbryta and the need for new treatment options for SCD patients. When we look at the breakout of riders, we are pleased that a range of health care providers are prescribing Oxbryta. Around 40% of the prescriptions are being written by nonspecialists, such as primary care physicians, nurse practitioners and physician assistance. And we are pleased to continue to see that overall prescriber base is writing multiple prescriptions, averaging approximately 3 per prescriber since launch, which we believe is a good indication of the experience and overall satisfaction with Oxbryta. Turning to payer coverage. We are ahead of schedule in reaching all targeted payers nationally and regionally and are engaging in follow-up meetings, setting the stage for our goal of broad coverage by the end of the year. Consistent with our expectations at the end of the second quarter, 53% of lives were covered by payers either through published policies or medical exceptions. This breaks out into 44% of commercial lives, 62% of Medicaid lives and 53% of Medicare lives having access to Oxbryta. Notably, we have secured fee-for-service Medicaid coverage in 42 states, including all 17 priority states where approximately 85% of SCD patients live. This is important given the influence the fee-for-service Medicaid plans have on the overall coverage picture in the states. This is also contributing to the ongoing growth in the number of managed Medicaid plans covering Oxbryta, either through policies or medical exception. In terms of commercial insurers, we are pleased that UnitedHealthcare commercial and pharmacy benefit manager, Prime Therapeutics, which represented about 9 million and 20 million lives, respectively, are now covering Oxbryta with broad coverage policies consistent with labeling. During the quarter, we also had an important win with the Federal Employees Health Benefits Program, extending Oxbryta coverage for all government employees and their families. This provides another example of the strong government coverage being established for Oxbryta, spanning Medicaid, Medicare, FEHB and the Federal Supply Schedule that covers the Veterans Affairs network through the Department of Defense. Our progress on the payer front is confirmed by our market research, which indicates that health care providers are satisfied with the access environment. We have received positive feedback on our patient support services and on the ability to obtain Oxbryta. We are pleased with the progress we have made with payers, and I'd like to reiterate that we continue to believe we will meet our goal of obtaining broad coverage by the end of the year. I will now turn the call over to Ted to provide an update on our clinical development activities and pipeline.

[Ted Love:]

Thanks, DJ. As we consider the progress we are making with the U.S. onto Oxbryta and the positive impact we are having for patients, a key priority for GBT is to make Oxbryta available to all patients living with SCD. In June, we announced our plans to expand our FDA label to include children as young as 4 years old and to secure initial European approval for Oxbryta. For the pediatric label expansion in the U.S., we plan to submit a new drug application to the FDA, including a new age appropriate formulation by mid-2021. We believe this will be an important treatment option for this patient population, largely because of the potential to mitigate long-term organ damage and life-threatening complications that can occur in adulthood due to the disease progression that starts early in life. For Europe, we plan to submit a marketing authorization application to the EMA by mid-2021 to treat hemolytic anemia in patients 12 years and older. Currently, all approved SCD therapies in Europe focus on pain. So Oxbryta has the potential to meet a critical need. As a reminder, the SCD community is geographically concentrated in Europe, which should allow for an efficient commercial infrastructure and launch, if approved. With respect to development, we are beginning to resume activities related to our clinical trials. We are working closely with our clinical trial sites on the protocols and the safety measures needed to support new patient enrollments. Our plans remain on track to initiate a pivotal clinical study for inclacumab, a fully human monoclonal P-selectin inhibitor in the first half of 2021. We believe inclacumab has the potential to become the best-in-class treatment for VOCs. Finally, we also continue to conduct original research in our labs and in collaboration with Syros, with the goal of developing more breakthrough therapies for SCD. I want to thank all of our employees for the excellent work and passion they bring every day. I am very proud of our team that has rallied in the current environment, shifting to a virtual workplace while maintaining unwavering focus on getting Oxbryta to patients. In closing, I'd like to take a moment to address the issue of racial injustice, which is finally getting the national attention it requires, if we are to become the country envisioned by our U.S. Constitution. We have too often been indifferent to failure to live up to that document, which states in a second paragraph, "We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness." The brutal murders of George Floyd, Breonna Taylor and Ahmaud Arbery and our ongoing mass incarceration of people of color are due to our failure to deal with racial injustice and exploitation. The massive protests across our country, in which both whites and people of color are pointedly demanding racial justice are forces that have made me hopeful. We may have arrived at a tipping point, where all of us will demand that we realize the ideal described by our country's founders. At GBT, we've been working on these issues since our founding. It's part of our DNA as a company and who we are as people. We are striving to live up with this ideal by changing the treatment paradigm for those with SCD and through our broader initiatives to address health disparities and racial injustice. With that, we'd like to open the call for questions. Operator?

[Operator:]

[Operator Instructions]. Our first question is from Jim Birchenough of Wells Fargo.

[James Birchenough:]

Ted, thanks for that strong statement at the end, and congrats on all the progress in the launch of Oxbryta. Just one question for me is, since launch, you had 350 patients in 4Q, 1,650 in 1Q and 1,000 this quarter, so roughly 3,000 unique patients. Could you maybe speak to the disposition of those patients between free drug, those that are being reimbursed? And maybe those that you might have lost to follow up? I'm just trying to get a sense of retention rate of the patients that have come on to therapy and how they're being cared for?

[Ted Love:]

First, Jim, thank you for the question. I think I'll ask DJ to give some of the specifics, although we are limited in some of the details that we're sharing at this point, but DJ is the appropriate.

[David Johnson:]

Yes. Jim, yes, we're not breaking out the exact distribution or disposition of the patients. What I can say is that, as we said in our prepared comments, we have seen the vast majority of the patients have good compliance as measured by refills. So refills are happening on time for the vast majority of patients, which we think bodes well for the long-term compliance, although it is early for a lot of the patient. The second thing I would just remind you about is some patients are in process. So some from Q1 were pulled through in Q2. It takes a certain amount of time depending on the payer to pull them through. And some in Q2 will be pulled through in Q3 in terms of actually getting the shipment of the drug. So some are in process. During that process, there's some that are lost to follow-up or abandonment. And when we look at kind of the marketplace, a common abandonment rate for the industry is around 15%. So we would expect to be consistent with the industry on losing some to follow-up through the process. And that -- with COVID-19, we'll see if that impacts that. It's -- people are very busy and focused on a lot of things right now. So there's going to be some folks -- and when I say abandonment, that doesn't mean forever. Some may abandon forever. Some may just abandon for a few weeks or a few months while they work on other things. So we're watching that closely. So those are a couple of things, I think, that help. And then, of course, we've always said that we have a really comprehensive free drug program to help act as a safety net as we work through the payer process with folks. So there's going to be a certain percent of patients that will go on the free drug program. Although I will say that we have been very successful, we think, in getting patients through the payer process, whether it's through formulary acceptance or through the medical exceptions, those are going very well. So we're getting plenty paid for as well. Hope that helps.

[Operator:]

Our next question is from Alethia Young of Cantor.

[Alethia Young:]

Congrats on the very good quarter. And Ted, firstly, I want to thank you for those comments at the end. I truly appreciate them. And thanks for being a leader. So about the launch, I'm just curious about when you do find physicians who are cautious, kind of how those conversations go? Like what's their pushback? What's kind of the rebuttal? And have those -- have some of those positions potentially starting to come around as they had early experience this thing?

[Ted Love:]

Alethia, thank you for joining the call and for being a supporter of our company and what we're trying to do. Actually, I'll ask DJ to add some more commentary. But I would say, overall, we've not gotten a lot of pushback. In general, what we're seeing is that the patients once they know about the drug and they hear about the drug through their networks are excited about the drug. And patients who get on it are generally saying that they can tell a difference on the drug very quickly, and that makes them excited about remaining on the drug and encouraging their friends and colleagues with sickle cell to get on the drug. We have, of course, seen physicians focus on patients with lower hemoglobins first. And that kind of makes sense, even to me, but, I think, ultimately, over time, that is going to change. Although I will say, even now physicians are using the drug in a broad group of patients, as DJ referenced, irrespective of hemoglobin and irrespective of the VOC history because they understand that the drug is really going after the fundamental molecular base of disease. So segmenting patients ultimately doesn't make a lot of sense. But as a place you might start, low hemoglobin does intuitively make some sense. But DJ, maybe you could elaborate more on pushbacks or things that you're hearing

[David Johnson:]

Sure. Maybe just one comment, Ted. I think back to my consumer behavior courses in college marketing. And they said that on average, you need to talk to any consumer 7 times before they make a buy decision. And patients and physicians are no different. So it's a distribution. The early adopters, we didn't need to meet with at all. They were ready to start Oxbryta right out of the gate, and we saw that in Q4 of last year. But the vast majority of folks, some need to be educated 4 times and really understand the drug, some need 10 times. And so we're right in the middle of that process of educating folks as many times as possible. We're getting to -- now that we've been out for a few quarters, you're seeing more and more physicians come on board. I mean we're almost at a 1,000 unique prescribers. And even during COVID-19, when there was a lot of conservatism upfront about how to operationalize in this environment, we still got new prescribers. So that tells me the education is working. The team is really optimized now with a lot of new digital tools to do more education going forward in the second half of this year. So we feel really good about that. But yes, it's just going through that process of educating. As Ted said, we're not getting a lot of pushback from people that don't want to be educated on Oxbryta. It's quite the opposite. People are quite interested in being educated, but some of them require multiple visits before they are ready to make a decision.

[Operator:]

Our next question is from Yatin Suneja of Guggenheim Partners.

[Yatin Suneja:]

Let me add my congratulation on a great quarter as well. Maybe if you could just provide a little bit more color. I know you guys just mentioned about the stabilization. Could you perhaps help us understand how the months have progressed? Were you seeing a month-over-month uptick in new patient start in Q2? And how those trend might be holding up in July and into August? And then with regard to the 3,000 patients or 3,000 new patient start, is it fair to assume that the vast majority are on the drug at the end of Q2, given that it takes only about 2 weeks for a new patient to start. So basically, anybody who was added before to last -- in the last 2 weeks should be on the drug. And then one quick one for Jeff, if you can comment on the inventory level, where they are in Q1 -- Q2, sorry.

[Ted Love:]

Thanks, Yatin. I'll ask DJ to comment on the first half of your questions, and then Jeff will talk about the inventory.

[David Johnson:]

Yes. So in terms of the process, and I just want to be clear about the new patient starts. The number that, I think, Jim referred to about 3,000 new prescriptions that we've announced. Those are not new patient start. Those are enrollments and unique prescriptions. So as we've stated, many of those are either in process or some can be in process. Some can be going on free drug. Some can be lost to follow-up. So the number of patients that start drug will always be lower than whatever number we give for enrollment. So that's just one clarifying point. And then -- I'm sorry, put me back on point, what was your first question that you had, Yatin, for me?

[Ted Love:]

He was also asking about kind of the ramp more weekly, monthly.

[David Johnson:]

Yes. And so that's an interesting one. At the end -- well, at the time we had our Q1 call, we were very hopeful, right, that shelter-in-place efforts were being lifted at that time, recall, and that there was some hope and some light that maybe we were getting past COVID in some of the markets where there's a lot of sickle cell patients. So we were very hopeful at the time. And I think we even communicated that we started to see some recovery on the enrollments as well. However, unfortunately, this has not been the case as Q2 continued, what we saw was that there was kind of a resurgence of COVID infections. And those states that had decreases in COVID infections actually had reversed course and saw increases again. So from that point of view, what we've seen kind of carry forward, I think, is Q2 is probably a good proxy for what we're seeing going forward into Q3 thus far in terms of enrollment and in terms of the amount of patients that will be able to get in to see physicians in any given week or in any given quarter, given the impact of COVID in the country right now. Jeff, did you have anything to add to that?

[Jeffrey Farrow:]

No. No, I think that's spot on. Of course, we did see that one immediate drop. We talked from the peak just prior to the pandemic being announced to the trough which is about 60%. And as we noted in our discussions earlier that it sort of averaged out at about a 40% decrease. And so as DJ said, I think Q2 is a good proxy for what we might see in Q3. And then just adding to your discussion or your question on inventory levels, Yatin. Inventory levels held at the various distributors was very consistent with what we had in the first quarter. So really, from an apples-to-apples perspective, you're looking at the same inventory hold.

[Operator:]

Our next question is from Liana Moussatos of Wedbush Securities.

[Liana Moussatos:]

Ted, we need you to run for President this year. My question is for Jeff. Can you remind us how you book sales and how long the manufactured product pre-approval is going to be used up?

[Jeffrey Farrow:]

Sure. So we book sales, we record revenue when we ship from our warehouse to the specialty pharmacy or the specialty distributor. So when they order and it arrives at their doorstep is when we recognize revenue. And for the question on how long our sort of R&D expense inventory is going to last. We expect that to probably continue into late this year, probably into the late fourth quarter before we exhaust that supply. So we -- gross margins will be unusually high until we get through that entire pre-approval inventory now.

[Operator:]

The next question is from Ritu Baral of Cowen.

[Lyla Youssef:]

This is Lyla on for Ritu. Congratulations on the progress. I was wondering if you could please clarify the trends you're seeing with the regional new prescription. I know that you mentioned that you're watching the south in Texas and California. But do those regions represent places that you've already seen a substantial hit from new Rxs? And how does this relate to the key 17 sickle cell these states with the majority of the sickle cell patient?

[Ted Love:]

Yes. I mean DJ, may want to add more, but I -- we really haven't spent a lot of time looking at it that way. We mostly focused on the big picture because as you break it into smaller and smaller groups, you do just get inherently more variability. But I'll just put a really simple point on this and maybe have DJ provide some more color. But I think our biggest obstacle right now is something that we're all facing. My wife wants me to go for my general checkup, and I'm saying, no, I'm not going to bother. I'm not sick. I'm not going to go in and risk getting COVID. And a lot of people are not going to their dentist and not going to their doctor right now. In sickle cell patients, given their risk, they're even more terrified. And that is coupled with the fact that while some physicians are comfortable prescribing Oxbryta through virtual interaction with that patient, some are not. So we are doing the best we can to try to get physicians comfortable. But we really don't expect sickle cell patients to start running into the doctor's offices until the environment are safer. And I think naturally, right now, there's concern about COVID, whether in Florida or whether in California or whether in in Alabama, I think there's concern about exposure. I think sickle cell patients are appropriately very, maybe doubly concerned about that. But DJ, maybe you want to add more than I know.

[David Johnson:]

There's not much more to add, Ted. That's exactly right. And it's so fluid. It's changing week by week, geography by geography, just based on infection reports and that sort of thing. But to Ted's earlier point, on June 25, the CDC put out their expanded list of at-risk populations. And of the 7 at-risk populations for COVID have increased risk sickle cell disease patients were right there in the middle. So things like that cause folks to be a little more cautious in this environment. So -- and that's pretty much true in any geography.

[Operator:]

Our next question is from Paul Choi of Goldman Sachs.

[Kyuwon Choi:]

I wanted to maybe get -- if I could get a clarification on the refill rates and maybe from DJ perhaps. Did you mean by that -- by refills that these are bottles being shipped out the door or are prescriptions being renewed, given that most patients, I believe, have a 90-day supply. And then just on the 40% trough here that you talked about earlier, is that sort of the baseline assumption for the second half of the year? Just some clarification on that would be helpful.

[David Johnson:]

Maybe I'll answer the first one and then maybe Jeff can help with the second one as well. So refill rates, yes, those are bottles shipped. So we're really counting, are people getting their bottles shipped on time. And so if they have a 3-month prescription, every 30 days, there's a contact between the patient and the GBT source solutions to set up their next shipment of their bottle. And those, for the vast majority of patients, are happening on time, which is -- gives us hope that we're having really good compliance. But in terms of a 40% decrease from Q1, I think we're confident in saying that, that's -- at this stage of the game until we see some improvements in COVID, which hopefully are around the corner, but that's probably a good proxy for Q3, at least so far, it has been for us.

[Operator:]

Our next question is from Matthew Harrison of Morgan Stanley.

[Matthew Harrison:]

DJ, I had one, I guess, for you. I just wanted to ask about conversion from these fee-for-service contracts into long-term contracts or commercial contracts and sort of how the cadence of that is going? And what sort of feedback you're getting as you're working through that process?

[Ted Love:]

Thank you, Matt. DJ, I think what he's asking about is fee-for-service and how that relates to the non fee-for-service Medicaid patients?

[David Johnson:]

Sure. The managed Medicaid?

[Ted Love:]

Yes.

[David Johnson:]

Yes. Thanks, Matthew. So as we stated in our prepared comments, it's going very, very well with the fee-for-service Medicaid, particularly in the 17 states where 85% of the sickle cell patients reside. All 17 states are covering patients now through their fee-for-service centralized Medicaid, either through a published formulary or through medical exception. In other words, they're paying for patients as we get them through the process with our hub. And so that's gone very well. We also mentioned that this is important because the fee for services have great influence given that it's centrally run, the formulary is done by the state. They often -- in fact, in some states, they mandate that the managed Medicaid formularies can't be any more restrictive than the fee-for-service Medicaid formulary. That's why that fee-for-service is so influential. And so we're having good progress getting patients through on managed Medicaid as well in those 17 states because of that success we're having with the fee-for-service, even though in some states, most patients go through managed Medicaid, the fee-for-service is really important. So we've really focused on that early. There's no contracting going on in terms of any supplemental kind of contracts and that sort of thing that we're focused on. We, obviously, are participating in the mandated discounts to the government. And so that's all gone very smoothly.

[Operator:]

Our next question is from Mark Breidenbach of Oppenheimer.

[Mark Breidenbach:]

Congrats on a very impressive quarter despite less than ideal conditions. Maybe 2-part question from me. First of all, I really appreciate that you did a review of chart and claims and lab data. And I'm wondering if we can expect to see an analysis of real-world patient demographics and outcomes presented at any upcoming medical conferences. And second part of my question, really, it's unrelated, but I'm wondering if you've seen any evidence of a rebound effect either in the real-world setting or in your clinical trials with increased VOCs in patients who discontinue Oxbryta, which has been a hypothetical concern for certain questions of drugs like PKR activators.

[Ted Love:]

Okay. Thanks, Mark. Why don't I start out with the question about rebound. So last year, we actually had a couple of very important abstracts on this question. And the data were actually quite striking and quite encouraging. Number one, the data showed that the higher your hemoglobin rose on Oxbryta, the lower your VOC rate was. So it was actually the antithesis of the concern about viscosity going up. And that's probably because it's not viscosity, which is the issue. It's the polymerizing red cells that are causing the problem. And so as the hemoglobin was going up, it was going up because the red cells were being protected from the destructive nature of sickle cell disease. In addition, to the question about stopping Oxbryta, there was also an analysis done of all the data we've ever accrued for patients stopping either Oxbryta or placebo in placebo-controlled studies. And what that data showed was, in fact, the rate of VOC observed over 30 days was higher in the placebo group than in the Oxbryta group. So what that probably suggests is that the trend that we have seen of Oxbryta decreasing VOCs may still be protecting these patients for a period as they come off of Oxbryta. That's probably the more rational hypothesis than this rebound hypothesis. So the data has been positive for lower VOCs as or hemoglobin goes higher on Oxbryta, and it's been positive for stopping Oxbryta versus placebo.

[David Johnson:]

There was a question about real-world data coming.

[Ted Love:]

And real-world data. So we -- this is the kind of data that we will be looking to get over time, and we'll be making public. We obviously don't know what abstracts will have at ASH this year yet. But that is the exact kind of data from real-world experience that we want to gather and make public.

[Operator:]

Our next question is from Matthew Holt of JPMorgan.

[Matthew Holt:]

Congrats on the quarter. Just wondering if you're able to give us a sense of how much overlap there is between commercial patients that have hemoglobin levels greater than 8 grams per deciliter and one that experienced 3 or more VOCs. Basically, what I'm trying to understand is whether doctors are prescribing indiscriminately of hemoglobin levels? Or if there are specific subtypes of patients in addition to the ones with low hemoglobin levels that doctors are targeting?

[Ted Love:]

Yes. I think it's pretty indiscriminate, but the data that DJ may want to reference, you may want to even put some numbers in there. But fundamentally, there aren't a lot of sickle cell patients with very high hemoglobin levels. So you are going to gravitate toward 8. But my recollection, when I look at the data, Matt, is that there is a very large percentage of patients, I think, at least 1/4 of the patients who have hemoglobins above 8.5. So this notion that it's only the patients with hemoglobin that are very low, only on Oxbryta. That's absolutely untrue. And it doesn't even make sense ultimately because if you think about HIV, for example, would you want to only treat the people with the highest viral load? Or would you want to treat people and keep their viral load from becoming bad? It's kind of true here. Why let people's bone marrow die to the point where their hemoglobins are very low to begin therapy. So I think, ultimately, while physicians may gravitate to the patients that they perceive as having the greatest need. Long term, the vision here has to be protect people from organ loss as opposed to intervene after organ loss. But DJ, I don't know if you want to add any more specific, but I do think it's quite a sizable percentage of people that are already being brought into Oxbryta to treat with hemoglobin's above 8 and even 8.5.

[David Johnson:]

Yes. To that point, that's exactly right. One of our largest groups of patients that have started as we look at -- again, these are claims data with over 1,000 Oxbryta patients. One of the largest categories are 8.1 hemoglobin to 9.5. And so it's clearly above 8. And obviously, still anemic, and so physicians feel comfortable initiating Oxbryta there. And so -- and of course, we've just scratched the surface. A lot of patients in that group, in particular, that still to be treated. And then to answer the question, Matt, if I heard it correctly, I think you're exactly right. I mean in our claims data, it showed that an interesting finding of more VOCs in the Oxbryta patients, and that makes sense, right? If you're a sicker patient or more advanced patient, perhaps you have more VOCs, perhaps your physician, those tend to be our patients that we found that had lower hemoglobins as well. And so lower hemoglobins, higher VOCs seem to go together with some of the early use of Oxbryta.

[Ted Love:]

And we are seeing physicians, patients on Adakveo and Oxbryta. And I think in the case of high VOCs, quite frankly, that probably makes a lot of sense to try to intervene with something that works immediately on VOCs as opposed to what is likely going on with Oxbryta where there's an effect over time due to allowing the inflammation to resolve with resolution or diminution of hemolysis.

[Operator:]

Our next question is from Jason Gerberry of Bank of America.

[Jason Gerberry:]

Just a question on the payer front. Just wonder if you could compare your commercial coverage, I think, Novartis disclosed, I think, 85% of commercial plan coverage for Adakveo. And are you seeing complement and use with Adakveo? And is there any payer pushback, the utilization of the 2 proprietary combination therapies?

[Ted Love:]

Well, I'll start kind of with the high level and maybe DJ will fill in some details, but the drugs are indicated for different purposes. And that's actually been a real, I think, strategic advantage, not only for us and Novartis, but I think it's a strategic advantage for the patient. So one drug is indicated to treat VOCs, the other drug is indicated to treat the fundamental nature of the disease, the anemia, the hemolysis, which every patient suffers from. So we pushed back really hard on somebody who is limiting our drug because of VOC history, one way or the other. VOC is, quite frankly, not in our indication statement. It is in the Adakveo statement, and that's why I know we have seen some patients be started on both drugs and payers have paid for that because they pay for 2 drugs in CF. They pay for 2 drugs in myeloma or sometimes 4 or 5 drugs. They pay for a lot of drugs in combination in HIV. It's really the norm to have multiple drugs in chronic life-threatening diseases.

[David Johnson:]

Yes. I'll just add a couple of comments to that, Jason. Ted is exactly right, big differences between the drugs, indication wise, administration wise, location wise, we’re outpatient, they're inpatient and payer wise, right? They’re through the Part B benefit and we’re through Part D. So very different kind of processes in everything around these products. So hard to compare them. We're very happy with our payer environment to be at over 50% coverage halfway through the year is exactly where we want to be to reach our goal of broad coverage by the end of this year. And most important for us is making sure the government payers are online. And the government payers through Medicaid, Medicare, the Federal Supply Schedule, all of that is going very, very well. So we feel like we're in good shape there.

[Ted Love:]

And he was asking about breaking out by payer, but I don't think we've done that. But I would say that we have done well in every segment of payer.

[David Johnson:]

Yes, I mentioned in my prepared comments that we're up 44% of commercial lives recovered, which, again, we're happy with where we're at there. We know the commercial lives are just a matter of time as they go through their process, and we do the update. So we feel good about that.

[Operator:]

The next question is from Debjit Chattopadhyay of H.C Wainwright.

[Debjit Chattopadhyay:]

So a couple, if I may. One, are payers or physicians acquiring a follow-up blood test after, say, 3 months for continued prescription and if docs are focused on a threshold of hemoglobin increase? Or is it really being directed by improvements in fatigue, et cetera, from a patient perspective, where -- with the 0.6 mg per deciliter, it doesn't lead to increase in hemoglobin, you would -- you should feel a lot better. And the second question is primarily from European commercial infrastructure build, when do you plan to start that? And especially if you're going it alone in a very concentrated market.

[Ted Love:]

Thanks, Debjit. DJ, you may -- DJ or Jeff may want to comment on Europe. But let me start out with the checking hemoglobin levels after starting therapy, many physicians like to do it. And as a physician, I used to like to do this kind of stuff as well. But one of the things I've heard now from a number of physicians is that the patients feel better, oftentimes even before the hemoglobin goes up. And the patients tell us that. And I've also heard from physicians that they've had patients where the hemoglobin actually didn't go up very much, but the patient is dramatically different in terms of their quality of life and what they can do with their lives in terms of exertion going back to work, et cetera. And actually, it’s what I predicted scientifically because hemoglobin going up is simply one way that end up climbing as that should help you. There are many ways that, that should help you. One is that all the energy that you spend on making red cells only to destroy them can be recovered, and that's a lot of energy when you think about the number of red cells we make. I’ve given this analogy, and I'll give it here again. If you formed a -- if you lined up every red cell coming out of a normal bone marrow, it would form a growing line, and the line would be growing at 15 miles per hour. So sickle cell patient is producing red cells at the rate of 150 miles per hour. So you recover some of that energy, and you can use that energy for a lot of things, even without your hemoglobin going up. The other problem in sickle cell disease is that the red cells cannot physically get through capillaries because they have this rigid polymer inside of them. So they're not really deformable. And even if you have a red cell that has plenty of oxygen in it, and it can't get through a capillary, it can't deliver oxygen. And if you can take some of that polymer load out, then you could allow the red cell to actually function. And then finally, I would add that, I think, personally, the left shifting in sickle cell disease is an enormous problem. And the analogy I get with people, it’s like a -- it would be like a train car without sideboards. The cargo would fall off. And that's why we have hemoglobin affinity so that the hemoglobin can hold on to the oxygen, while the red cells traverse into the deeper tissues and then at those deeper tissues, the oxygen stripping mechanism strip the hemoglobin off. But if you don't have much affinity of hemoglobin, the oxygen just falls off. And when the red cells get there, they don't have much oxygen. So that's a long-winded answer, but it's the truth. I mean this is exactly why there is not going to be a perfect correlation between hemoglobin and clinical benefit with the drug. And we've seen that over and over again clinically, although I definitely think the hemoglobin going up is good. It is not required by the label. And that's one of the things that we're trying to train physicians is that you don't need to practice medicine that way. You don't need to get a hemoglobin, pre and post treatment. You can, if you want. But if it impairs you from being able to treat your patients during COVID, it's not clear that you're doing the patient of big service.

[David Johnson:]

And just regarding Europe, so we've been -- obviously, we've announced that we plan to file next year in Europe in the first half of the year. So we don't want to get ahead of ourselves in Europe, but we have started the process, certainly a lot of planning for Europe. As you may know that in Germany, you can generally launch pretty quickly after approval. So we've started the time lines and all the planning that's associated with that and have begun some of our preliminary hiring of key roles in Europe to help us with all of that planning. But obviously, we want to file first and get the drug to patients as we build-out. But Ted also mentioned in his prepared comments that it's a very targeted patient population. So we think our infrastructure can be pretty tight there and make a big difference with few people.

[Operator:]

Our next question is from Raju Prasad of William Blair.

[Raju Prasad:]

I'm hoping to hear a lot more earnings calls with comments like that. I think it's important. Just a quick question on your -- the highest decile of physicians that you guys have spoken with, it seems like you've hit most of them or, I guess, 86% of them. What's been kind of the profile of patients that they've put on? And what's the pushback from those physicians and updated data coming up potentially in the fourth quarter or at access here from the HOPE trial? Is there anything from that data set that maybe we can glean to address some of the questions you've been getting from these physicians?

[Ted Love:]

So thanks for the question. The pushback is not really a term, I think, we've been getting a lot of. And as we said earlier, I think, the biggest challenge for us has been that maybe the pushback is that physicians many times like to see the patient before prescribing a new drug. And COVID is making many of these patients not show up for their appointments. And so that's -- if you want to use the term pushback, that's probably the biggest pushback that we're facing. Of course, that should be relieved as COVID gets better, but that also might be enhanced by the physician realizing it. There's nothing in our label from the FDA that recommends checking any blood test with Oxbryta. You don't need to follow any liver enzymes. You don't need to follow hemoglobin. There's no reason to really focus on that. So over time, I think the COVID pushback will resolve. But I think also, over time, physicians will become more and more comfortable not trying to tie Oxbryta to hemoglobin level so tightly because it's become increasingly clear that if the hemoglobin doesn't go up and the patient says I'm dramatically better, would you really want to stop the drug in that patient? You won't. So that may mean that getting the hemoglobin at the baseline isn't going to supply a discussion with the patient any -- in any way.

[Operator:]

Our last question is from Joe Catanzaro of Piper Sandler.

[Charles Frantzreb:]

This is Charles on for Joe. I wanted to ask a follow-up question on to your earlier comments about prescriber mix. Could you provide any additional detail on how prescription levels differ in relative terms among sickle cell specialists versus nonspecialists versus mid-level prescribers? Or maybe what the difference in relative opportunity is between those groups? And maybe as a corollary, how do sales interactions differ between advanced versus less advanced prescribers, if at all? And what differences are there in willingness to prescribe or the buying required between those groups, if any?

[Ted Love:]

It must have been about five questions in there. DJ, it’s probably all to you.

[David Johnson:]

Yes. No, thank you. Thanks, Charles. So in terms of -- to give you a little background, we call in about 6,000 health care providers that see sickle cell patients in the U.S., about half of those are specialists, about half of those are primary care. Primary care can be anything from a PCP to a nurse practitioner or physician assistant to a pediatrician. Specialist primarily in sickle cell disease are hematologists and to a smaller extent, pediatric hematologists, which, of course, will become more and more important as we get approvals in younger and younger patients. But the largest group of prescriptions we've had so far or enrollments have been from the hematologist specialty. And they make up -- it changes week by week, but anywhere from 40%. And if you add in the small percentage of pediatric hematologists that have some adolescents that are using Oxbryta, maybe as high as 65% in a given week of enrollments or a given month can be from that category. The rest, 35% to 40% are nonspecialists, really, these are the primary care docs that we call on. These are the nurse practitioners and physician assistants that see a lot of patients. And so that group is very important to us as well. Now you're right that the specialists do have higher volumes. And so we do tend to spend more time with the specialist. They tend to be higher decile, as we say. Internally, we decile our physicians and those with more patients and more influence and involved in studies and whatnot, we're going to make sure that we're calling on them more times. And so that's why we've had a higher penetration or engagement rate that we talked about with the specialists than with the overall population. So that's because we're prioritizing that group in the first half of the launch. It doesn't mean that the rest of the folks aren't important. It's just that they have less patients. And to be honest, they tend to take a little bit longer and want to follow the specialists and get insights from the specialists first. So it makes sense for us to do it that way. So that's what we're doing. The -- we built our teams to call on both. And so like I said, our reach allows us to do that. So we're calling on all top prescribers of sickle cell patients in our geographies in the country with the team we have in place now. So that will continue to grow over time in terms of number of prescribers.

[Operator:]

That is all the time we have for today. I would like to hand the call back to Ted for closing comments.

[Ted Love:]

Thank you. And I just want to thank everybody for joining the call today. We want to wish you all health and staying safe. Also, I want to let everyone know, please reach out to Stephanie Yao, if you have any additional questions. Thanks again.

[Operator:]

Ladies and gentlemen, that concludes this conference. Thank you for joining us. You may now disconnect your lines.