OptiNose, Inc.
Q3 2019 Earnings Call Transcript

Published: 13 Nov 2019

[Operator:]

Ladies and gentlemen, thank you for standing by. And welcome to the Optinose Third Quarter 2019 Earnings Conference Call. At this time, all participants’ lines are in a listen-only mode. After the speakers presentation, there will be a question-and-answer session [Operator Instructions] Please be advised that today’s conference is being recorded. [Operator Instructions]I would now like to hand the conference over to your speaker today, Jonathan Neely, Vice President of Investor Relations. Thank you. Please go ahead, sir.

[Jonathan Neely:]

Good afternoon. And thank you for joining us today as we review the Optinose’s third quarter 2019 performance and our plans for the remainder of the year. I am joined today by our CEO, Peter Miller; our President and Chief Operating Officer, Ramy Mahmoud; and our CFO, Keith Goldan. The slides that will be presented on this call can be viewed on our website optinose.com in the Investors section.Before we start, I would like to remind you that our discussions during this conference call will include forward-looking statements. All statements that are not historical facts are hereby identified as forward-looking statements. Forward-looking statements are subject to risks and uncertainties that could cause the actual results to differ materially from those indicated by such statements.Additional information regarding these factors and forward-looking statement is discussed under the Cautionary Note on forward-looking statement section of the earnings release that we issued today as well as under the Risk Factors section and elsewhere of Optinose’s most recent Form 10- K and Form 10-Q that are filed with the SEC and available at their website, sec.gov, and on our website at optinose.com.You are cautioned not to place undue reliance on forward-looking statement. The forward-looking statements during this conference call speak only as of the original date of this call or any earlier date indicated in such statement and we undertake no obligation to update or revise any of these statements. We will now make prepared remarks and then we will move to a question-and-answer session.With that, I will now turn the call over to Peter Miller. Peter?

[Peter Miller:]

Thank you, Jonathan, and good afternoon, everybody. We appreciate you joining us for our third quarter update. We continue to feel great about our overall business and are excited in particular to discuss the continued strong growth in demand for XHANCE and our plans to sustain that growth.Starting on slide three, we will go into more detail in a moment, but I’d like to start by providing five key highlights to take away from today’s presentation.First, we continue to deliver a strong growth in the number of XHANCE prescriptions with an increase of 27% in the third quarter of 2019 compared to second quarter 2019. Importantly, this growth is not just from new prescriptions.Both new prescriptions and refills are growing nicely indicating strong interest in the product from both physicians and patients. We are particularly pleased with this growth in the third quarter and it is typically a down period for the market.As we review later, our disproportionate growth is also reflected in the fact that the share of intranasal steroid prescriptions written for XHANCE in our target audience also continue to increase at a good rate in the third quarter. This consistent share growth is encouraging, and importantly, we believe our current share is indicative of a substantial upside that remains.Second, in the third quarter, we estimate the average net revenue per XHANCE prescription was $202, up from a $197 in the second quarter. For the nine months ended September 30, 2019, that produces an overall average net revenue per prescription of $194. Given these strong results, we have raised the low end of our full year guidance range for average net revenue per prescription, which we now expect to be in the range from $195 to $205.Third, our growing volume coupled with an increasing average net revenue per prescription yielded strong net revenue growth. Today, we reported XHANCE net revenues of $8.7 million in the third quarter of 2019, an increase of 30% over second quarter. Year-to-date, XHANCE net revenues through September are $19.3 million. Third quarter was in line with our expectations.As a result, we are tightening our expectations for full year 2019 XHANCE net revenues. We now expect a range of $30 million to $33 million versus our prior expectation of $29 million to $34 million for the full year of 2019.Fourth, our cash position is strong, at $125 million as of September 30, 2019 and the Pharmakon financing we entered to in September is expected to provide incremental cash of $30 million in early 2020 and up to $70 million through 2021.And last, in September we signed a license agreement for ONZETRA XSAIL. This license agreement is important to us, as it means the treatment will continue to be available for patients. It also provides incremental cash to support the building of our ENT and allergy focused company.Turning to slide five, I am very encouraged by the strong growth in prescription volume we have continued to observe through the last four quarters. The number of XHANCE prescriptions in third quarter of 2019 was nearly 43,000. This represents growth of 27% over the second quarter of 2019 and compared to the third quarter of 2019, the number of prescriptions increased by more than a factor of four.This rate of growth during third quarter is especially encouraging in light of intranasal steroid market dynamics, which typically produced a decline in the overall market during the third quarter, has occurred again this year.As we enter into the fourth quarter of 2019, we believe seasonal market trends can be expected to return to greater favorability. We are pleased to report having delivered approximately 18% month-over-month growth for October over September, a strong start to the final quarter of 2019.I would like to note that growth in the third quarter was again turned by increases in both the number of new patients and the number of refills, and that the proportion of total prescriptions attributed refills has continued to increase as we begin to see more patients using more months of XHANCE to treat the chronic condition. We are also encouraged the growth is being driven in both our 80 legacy sales territories and also our 20 new territories that started in April of this year.As we look into the fourth quarter, in addition to more favorable market conditions, we expect to see continued growth in the contribution of our new territories as these territory managers get even more productive. We also expect to realize continued benefit from the use of the seven-day sample we introduced a bit earlier this year.Turning to slide six, we believe there is a large market for XHANCE, and therefore, believe that a very significant upside remains for the product, even with the currently targeted audience of physicians.One way to evaluate that potential is with the XHANCE share of intranasal steroid prescriptions written within our target physician audience. To be clear, most of the INS prescriptions written within our target physician audience are for chronic sinusitis, allergic rhinitis and other conditions outside of our current nasal polyp indication.Nevertheless, share is a measure we track, because we believe there is potential for error in diagnosis specific prescription data in this category and because some physicians are choosing to use the product outside of the nasal polyp indication. Growth in this year has been rapid and steady by nearly a factor of four in the last four quarters from 0.9% in fourth quarter of 2018 to 3.4% in October 2019.We believe that these physicians continue to personally observe XHANCE treatment in enrolled patients, there is lots of room for continued strong growth and that the ultimately achievable share is much higher, suggesting a great deal of future potential just within our current target audience.Turning to slide seven, we have confidence that our current commercial strategy is working, as evidenced by the continued significant growth of XHANCE over the four consecutive quarters since the third quarter of last year. Most of our focus will therefore be to continue to drive strong execution of the strategy, but there are a few areas we are also evaluating to further accelerate this growth.One of these is direct-to-consumer communication. We have taken a disciplined approach to DTC, learning first through a digital pilot that started in November 2018 and ended in April 2019. As our next step, we are currently running a multi-channel test market pilot in Cleveland, Charlotte and Hartford, that we expect to complete soon.We plan to allow this pilot to complete and then carefully evaluate the impact of the investment before committing to a broader DTC program next year. If we elected to move forward in 2020, we expect that our program would run only during time periods that we believe DTC would be more efficient.Taking a moment to look deeper into the effectiveness of our ongoing commercial efforts, we are encouraged by the continued progress we see in both our market research and in interactions with physicians.On our second quarter 2018 earnings call, we described how we assess progress within our target physician audience. At that time, our survey data suggested that our efforts were succeeding in moving physician perception from a high degree of product awareness through an understanding of how the product works, to achieving a crucial perception that XHANCE produces a differentiated drug deposition pattern.That progression happened exactly as we planned, allowing us to transition our communication emphasis to the key next -- to the next key task in the product messaging latter, achieving a perception of differentiated clinical outcomes.We knew that the next step will require a sustained promotional focus posted by good clinical research data, plus physician experiences in the product enrolled patients, plus increasing awareness and discussion by peers in the specialist community.We recently completed a follow-up market research survey of target physicians to check our progress. I am pleased to report that according to the physicians surveyed the response good results seen in their patients is one of the leading reasons they now prescribe XHANCE.We also observed substantially improved physician perception of XHANCE on the majority of critical efficacy domains, which drive prescribing decisions. Continue to improve this perception will be the primary focus of our sales team and we will provide them with new analysis and data to support this effort such as the prior nasal steroid sub-group analysis we described in our second quarter 2019 call.In addition physicians believe in the product will be effective for patients. We continue to believe it’s vital to make sure they have a positive perception of the accessibility and affordability of the product. Again is a subjective we see continuing improvement in perceptions behind the 0-30-50 Patient Assistance Program we introduced in September of last year.Lastly, we understand the importance of market access and have continued to work to sustain and grow XHANCE coverage. We estimate that our commercial coverage is approximately 75% and we continue to pursue additional contracts to increase both commercial and government coverage and improvements to existing coverage.In a few moments I will update you on our chronic sinusitis program and provide some closing remarks.And now, I will turn the call over to our CFO, Keith Goldan, for comments regarding our recent debt financing with Pharmakon Advisors, third quarter results and perspectives regarding full year 2019.

[Keith Goldan:]

Thank you, Peter, and thank you to everybody for joining today. Turning to slide nine. In September we announced a $150 million no purchase agreement with Pharmakon. We did this add further strengthen our balance sheet, which had $125 million of cash and cash equivalents as of September 30, 2019.To be clear, the $125 million includes drawing the initial proceeds from Pharmakon and using those proceeds to retire our previous indebtedness to Athyrium. More importantly, relative to the ending cash balance for third quarter 2019, the Pharmakon financing provides us the potential subject to certain conditions to draw up to $70 million of incremental cash through 2021.We expect to draw the first $30 million in early 2020. This first draw is triggered by a fourth quarter finance -- XHANCE net sales threshold that we believe we will exceed. Also important is that, in the structuring of this financing, the additional $40 million of cash potentially available in 2020 and 2021 is at our discretion.Finally, and most importantly, this facility provides the potential to extend our cash runway and enables us to focus on continuing execution of our current successful commercial strategy.Turning to slide 10, as we reported Optinose recognized $8.7 million of XHANCE net revenue in the third quarter and $19.3 million year-to-date through September 2019. As noted on prior calls, one of the metrics that we track is XHANCE average net revenue per prescription, which is calculated by dividing net revenue for the quarter by the estimated number of XHANCE prescriptions dispensed during the quarter.We believe this is a useful metric to evaluate the net revenue generated per prescription. However, we remind you that this metric is subject to variability. That variability is the result of factors that do not necessarily reflect a change in the price that is paid for an individual unit of XHANCE including ordering patterns and inventory levels for our wholesale customers and pharmacies that we sell to directly, utilization rates of patient affordability programs, the proportion of patients acquiring XHANCE through an insurance benefit and other factors.Based on available XHANCE prescription data, purchase from third parties and data from pharmacy partners, our average net revenue per prescription for the third quarter of 2019 was $202, which was an increase over the second quarter average of $197.The increase from the second quarter was primarily due to our need to provide less co-pay assistance as more patients out-of-pocket limits following the annual reset of insurance deductibles commonly in January.Typically, once the patient meets their out-of-pocket threshold for the year, insurance benefits pick up more of the cost of prescription drugs, which in turn reduces the amount of co-pay assistance provided by our affordability program.Overall, for the first nine months of 2019, XHANCE average net revenue per prescription was $194. Given year-to-date performance and our expectation of quarter-over-quarter favorability in the fourth quarter of 2019 due to be out-of-pocket expense and co-pay assistance dynamics, I just described, we are increasing the bottom end of our expected range for full year 2019 XHANCE average net revenue per prescription.Moving to slide 11, as highlighted by Peter and in our earnings press release, we are tightening our expected range for full year 2019 XHANCE net revenue to $30 million to $33 million, compared to our price range of $29 million to $34 million.As XHANCE is a product still in launch phase during 2019, we waited until the second half of the year before providing full year guidance in order to have more information regarding product demand and average net revenue per prescription and we may elect to take a similar approach in the future. In addition, we now expect full year 2019 XHANCE average revenue per prescription will be between $195 to $205.Finally, regarding operating expenses, we are reporting that the third quarter of 2019 operating expenses were $30.8 million. Based on our operating expenses through the third quarter and our strong commitment to continue to be efficient with our cash, we are reducing our full year 2019 expectation for total operating expenses to find that sales, general and administrative, plus research and development expenses to be in the range of $126 million to $129 million, of which approximately $10 million is expected to be stock-based compensation.Total operating expenses, excluding stock-based compensation, are expected to be in the range from $116 million to $119 million. Previously, our guidance for total operating expenses range was $128 million to $133 million. Thus, the midpoint of the new guidance range is $3 million less than the midpoint of the old range.I will now turn the call back over to Peter to give a brief pipeline update and closing remarks. Peter?

[Peter Miller:]

Thanks, Keith. Turning to slide 13, in addition to launch of XHANCE with the current indication, we believe significant additional long-term value could be created by achieving a first ever indication for the treatment of chronic sinusitis. This new indication may empower promotional access to a significantly expanded target audience.Today, we announced that we expect topline results from the first of two pivotal CS trials in the second half of 2021. With respect to the second CS trial, in addition to recruiting, we are still focused on opening new investigational sites, notably global sites in countries where lengthy regulatory approvals have been required to permit the research to proceed.We look forward to providing future updates on the CS program, which we find particularly exciting. This is because CS is an indication for which we are aware of no current FDA approved drug treatment, because it is conditioned with a very high prevalence, which is treated by substantially expanded universe of physicians and because treatment guidelines currently call for off label use of needle steroids.Turn to slide 15. In closing, what we hope you heard in our prepared remarks is that we are confident that our current commercial strategy can continue to drive strong growth XHANCE in both prescriptions and net revenue and are growing yet still modest share penetration is indicative of a large market that offers great potential for tomorrow.We delivered our third quarter 2019 performance in line with our expectations and as a result we are tightening and improving our financial guidance for XHANCE net revenues, average net revenue, product, average net product revenue per prescription and operating expenses.In addition, we have a strong balance sheet and recently completed the financing with Pharmakon that is expected to provide access to additional cash. The additional cash will enable us to stay heads down focused on execution of our successful commercial strategy.And finally, we are successfully completing other important corporate objectives. This includes the license agreement for ONZETRA XSAIL and the ongoing conduct of our chronic sinusitis clinical program. I look forward to our future updates.Thank you. And I would like to open up the call for Q&A.

[Operator:]

[Operator Instructions] Your first question comes from the line of Gary Nachman of BMO Capital Markets. Your line is open.

[Gary Nachman:]

Thanks. Good afternoon, guys. So I just was hoping to get a little bit more color on the refill rates, what those look like. It sounds like they have been improving, but if you could give us some more color on that, that would be great? And then in the third quarter you grew significantly above the market with about a 38% delta and in October you grew above the market by a smaller magnitude. So, were there some competitive dynamics in October that are noteworthy that might continue in the fourth quarter and then I have a follow up after?.

[Peter Miller:]

Yeah. I will take the first Gary on refill rates, and believe it or not it’s still a little bit too early to have us at this finite number of refill because as you know we offered -- we introduced our 0-30-50 program about a year ago, but it took few months for it to really sort of kick in if you will.I can’t tell you that the refill rate we are seeing continues to increase month-over-month and the proportion of refills continues to grow as a result of that. So all I can say Gary is, it’s a -- we are feeling really good about refill and I think indicative of a product that’s really working for patients.Relative to competitive, obviously, the Dupilumab was introduced in the July, August time -- June, July, August timeframe. And at this point Gary it’s really too early to tell, but we don’t believe there was significant impact from Dupilumab prescribing on XHANCE based on a lot of the work that we are doing and we remain very confident in our ability to grow the business and market, and as reported we did produce very strong share in October of 3.4%. So we just continue to feel very good about our strategy and our commercial focus.

[Gary Nachman:]

Okay And then just the -- for the status of the DTC pilot in a three test market, so when will you have those results, it sounds like, it should be relatively soon. And what will you need to see in order for it to be supportive of broader DTC in 2020 next year. Just -- and maybe anecdotally what you have been seeing so far on that. And then maybe lastly just the status of a search for a new CCO if that’s in the works and when you think you might be able to identify someone? Thanks.

[Peter Miller:]

Yeah. Gary, Ramy feel free to jump in on any piece of this. But, relative to DTC, I think, we announce, we are going to reasonably soon that the DTC initiative if you will, will end, because it was a 12-week period that we were running the pilot.However, it’s going to be weeks, probably, a few months, Gary, to really read the results, so it will certainly be into early next year. And the obvious reason for that is, the cycle of generating demand in the prescription market is a cycle, you have to get patients aware, go to a doctor get an appointment, have the doctor write the prescription and it’s not like a consumer product where you can sort of read demand reasonably quickly. So, as I said, I think, it for sure is going to take us into the early part of next year to really read overall results.What we are going to need to see, Gary, it’s -- we are obviously tracking awareness of the product, we are tracking physician and -- both physician and patient. But at the end of the day we are looking to drive prescriptions. So the most important measure of whether we are going to proceed with the pilot or proceed broadening the pilot, we will see if we drive new prescriptions in those markets.In terms of what we have seen so far, it’s too early, Gary, I will tell you anecdotally, we are hearing lots of positive things from both physicians and patients in the market, but I am just going to say it’s too early. We are encouraged is what I would say, but it’s just too early.Regarding the status of our Chief Commercial Officer, I think, you have heard us saying in prior calls. First of all, Tom was a terrific contributor and he’s a guy that we are sorry to see go. One of the things we are very fortunate that Tom did was built an exceptional team underneath him. We have five very strong senior leaders who are reporting to Tom. Those leaders who are reporting into Ramy, now Ramy and I, as I think, have always been pretty involved and actually very involved in the business.But we are honestly sort of making sure we take our time not for -- not because we are trying to be slow, but we are trying to make sure that we really look for a great candidate. And we think we have a great opportunity here at Optinose and not only with the current focus on XHANCE, but the ambitions we have to building a leading ENT and allergy company. So it’s going well, exactly as we would have expected on the search for new -- for a replacement for Tom.

[Gary Nachman:]

Okay. Thanks a lot.

[Operator:]

Your next question comes from the line of David Steinberg of Jefferies. Your line is open.

[David Steinberg:]

Yes. Thanks very much. I have three questions. First, you mentioned, Keith, that you are taking down your guidance range for XHANCE by $3 million and I also notice that your other expense line kind of ballooned up from averaging about $1.7 million. It looks like $9 million this quarter. So first on the lower expenses, is that simply a shifting of R&D to next year or less promotion? And then, with a bigger increase in the other expense line, is that just like a reallocation of expenses or something else. And then my second question is, can you update us on off-label use particularly in allergic rhinitis, I think, you said in the last call that, less than 25% are from off-label use. And then, finally, just more housekeeping questions, what percent of total scripts that we see in IQVIA are mail order and what our retail at this point, I think, last quarter was 85% to 90%? Thanks.

[Keith Goldan:]

David, this is Keith. I will handle maybe the first and the second -- first and last, and then turn it over to Peter to talk about the -- your off label use question. So with -- first, with respect to the expenses that showed up in other expense, those were primarily expenses related to the retirement of the Athyrium debt. There is interest, prepayment penalties payable, as well as an amount of make whole interest that we paid. So these were recorded in other expense.With respect to your question as it related to kind of the where the overall decrease is coming from? I will say it is a mix, some we -- as is often the case, you have some expenses that some of the -- some of our departmental heads thought they could -- thought they would expand this year that are going to be moving into next year. But a lot of it is just, as I mentioned in my prepared remarks, just we are always focused on being prudent with our cash. So I think some of it is just careful spending.Jumping to your last question, with respect to the proportion of scripts, TRxs that are captured by IQVIA. The range is consistent with what we reported prior quarter. We believe IQVIA is capturing between 85% and 90% of the TRxs that are dispensed in the period.

[Peter Miller:]

And David, just to clarify, was your question what Keith just answered or was it the proportion that’s truly in retail versus in mail order?

[David Steinberg:]

No. I think, Keith got the question, is just when we see the weekly IQVIA data we just wanted to get a sense of what percent is that of total prescriptions, which I think he answered.

[Peter Miller:]

Yeah. Terrific. Relative to use of the product by docs, we -- not much has changed honestly Dave, we continue to see the majority of the prescriptions written in the chronic rhinosinusitis area, reasonably split half and half between nasal polyp and non-nasal polyp or as chronic sinusitis patients and less than 25% allergic rhinitis.

[David Steinberg:]

Great. Thanks very much.

[Operator:]

Your next question comes from the line of David Amsellem of Piper Jaffray. Your line is open.

[David Amsellem:]

Thanks. So just wanted to get an update on the payer landscape and if anything has changed meaningfully in terms of prior ups and step out it’s in terms of how onerous is step outs are onerous. Can you talk to that, I guess, qualitatively? And also what portion of commercial covered lives have, what you would call hassle free access, I know you talked about the metric before. So that’s number one. And number two is, if you can share to opine on net revenue per Rx in 2020 or at least give us some color directionally on where that might head, that will be helpful? Thanks.

[Peter Miller:]

Yeah. I will take the first, and Keith, I will pass second to you. In terms of payer meaningful changes, we continue to feel very good about the coverage, David, as we said historically that, we are hovering between 75% to 80% in terms of coverage, we have real focus across the back half of this year on government contracts.And I will remind you by the way that the huge majority of prescription in this category are commercial. But, nonetheless, there is business in government and we certainly want to make sure those patients get potential access to the medication.And I can tell you that we are making real progress to signing contracts on the government side, as I am sure you know, it takes a while for that to work through formulary coverage. I think you will start to see that across 2Q, 3Q, really potentially showing up on the government side.And in terms of your question on hassle free versus requiring some additional work, it’s really pretty consistent David in terms of over the last three quarters or four quarters, no real change, meaning that of the 75%, roughly 75% commercial coverage that we report. It’s about 10% to 15%, in some form of a additional work by a doctor, an office.Some -- and as I think you know we focused on prior authorizations that are reasonably simple, they are not onerous for the most part and that would put about 60% or so. And what we defined is a hassle free historically and reasonably unchanged.

[Keith Goldan:]

And David…

[David Amsellem:]

That’s helpful.

[Keith Goldan:]

David, with respect to your question on total average net revenue per TRx, we are not giving guidance at this point on 2020 expectations. Although, I will comment that we would expect a similar trend next year as we saw this year and really last year as well.And that is in the first quarter, assuming that we would keep our current co-pay assistance program or current affordability program in place, we were covering out-of-pocket costs, because of the deductible resets that typically occur in many plans in January, if we had the same plan in place then we would expect to see lower average net revenue per TRx in 1Q.And then gradual growth through the year as more and more patients meet their out-of-pocket thresholds whether it be in a high deductible plan or not if it’s in a high deductible plan to meet the threshold or some patients just has an out of pocket max and in a typical HMO plan.So you know as those patients hit their out-of-pocket threshold -- maximum thresholds we would assume our proportion of the insurers’ proportion of coverage would go up, and therefore, we would have to contribute less through our Patient Affordability program, resulting in a higher average net revenue per TRx.

[David Amsellem:]

Okay. Thanks.

[Operator:]

Your next question comes from the line of Randall Stanicky of RBC Capital Markets. Your line is open.

[Randall Stanicky:]

Great. Thanks. I just have a couple, with -- Peter with the new sales initiatives, most of them started back in the second quarter. I mean, whether it be the addition of the 20 reps in 2Q, the seven-day sample began I believe in May and then the pilot DTCs, even some of the contract wins that you have called out. By order of magnitude, what -- which of those is having the biggest positive impact so far with, I guess, six -- four months to six months or so behind you here, are any of these initiatives having an outsized positive impact relative to the others? So that’s question number one. And question number two, do you guys have a sense at this point, how many scripts the average patient is using per year or trending to per year, I guess, what are you seeing there? That’s the second question and then I have one more follow-up.

[Peter Miller:]

Yes. On the first one -- Randall, thanks for the question. The easiest one to answer is the impact on DTC and the reason I say that’s the easiest is, that’s a test and a pilot. So the impact broadly on prescriptions is going to be not substantial, even if we were very successful in the three test markets. So that will not for sure have national impact. Even as I said, even if we have significant impact in those markets they are just not substantial enough.Relative to where we are seeing contribution, from the territory managers versus the seven-day sample, I am going to answer that as, yes. It’s sort of hard to tease it apart Randall. I will tell you, we feel terrific about the contribution that we are seeing from the 20 new territory managers that we added in April of last year. We are obviously tracking that group.And encouragingly we are seeing nice growth in our legacy territories, we feel great about that group as well. And we are seeing really good, just beginning to accelerate, honestly growth on the part of the new territory managers. So we will see -- but we are hoping for continued good acceleration and contribution from the territory managers.The seven-day sample, the analysis that we have done suggests that’s going to have impact as well. As you can imagine, it’s just hard to tease them apart. But I will tell you, as a result of the seven-day sample and our view that it won’t have the same cannibalization as the 30-day sample did, we are distributing significantly more samples with the seven-day than we were with the 30 day.And we are seeing in offices, where we are starting to increase samples, nice growth. So that probably wasn’t the specificity that you wanted. But I will tell you we are feeling good about both levers that we are pulling there.

[Randall Stanicky:]

Did you guys disclose what percent of patients who get a sample move on to prescription patients?

[Peter Miller:]

We have not. I am not sure we even can track it honestly at that level. It’s a tough thing to track at the patient level. But we don’t -- we have not disclosed it.

[Randall Stanicky:]

Okay.

[Peter Miller:]

Relative -- I will tell you though, Randall, we have good data that says that seven-day sample is an effective way to drive the business. Relative to Rxs per year, we have historically talked about four prescriptions per year -- I am sorry, Keith.

[Keith Goldan:]

In the PPN.

[Peter Miller:]

In the PPN network and we don’t have any data at this point in time to believe that that isn’t a good number. We believe that’s -- it looks to be a good number.

[Randall Stanicky:]

Okay. And then -- that’s helpful. And then my last question is more big picture, just one of the glaring themes in the market is this notion that there’s a ton of cost infrastructure selling a relatively small number of products, setting up a pretty big opportunity for therapeutic consolidation within the sector, you and I have talked about this before. Where are you guys on this, I mean, executing on business development to give your rep base another product, is that something that is high on the list of things you are focused on for 2020, is it a nice to have or is it more of a back burner as you guys try to drive the XHANCE launch?

[Peter Miller:]

I will start Randall with what I always start, which is the full -- the top five focuses immediately for the company are driving XHANCE business. And we believe it’s critical to have a business that really has strong trajectory to build on and so that’s the primary focus of the company, I know you are not surprised to hear that.Relative to putting additional products into the infrastructure, it’s absolutely something we are working on. I think you saw that we announced, Michael Richardson. We hired Michael in August of this year. Michael has been a terrific addition to the team. It’s an area that we are beginning to create real focus against.In the near-term, the focus is XHANCE, but as we have talked about historically, we absolutely have ambition to build a leading ENT and allergy specialty company and you can’t do that with one product. So it’s absolutely going to be something we are focusing on.I don’t want to talk about high, medium, low, Randall, I will just say, that it’s, certainly in the next 12 months to 18 months, it’s something that we are going to focus on try to make happen.

[Randall Stanicky:]

And are there assets out there?

[Peter Miller:]

Absolutely. Absolutely.

[Randall Stanicky:]

Okay. Great. Thanks guys.

[Operator:]

Your next question comes from the line of Brandon Folkes of the Cantor Fitzgerald. Your line is open.

[Unidentified Analyst:]

Hey. This is Brian [ph] on for Brandon. Apologies if you have asked this already, just hopping through calls. My first question is, while it is still early, do you have any insight into the persistency for XHANCE, do you still believe four prescriptions a year is a number to think about per patient and does this differ at all between nasal polyps and chronic sinusitis patients? Thanks.

[Peter Miller:]

Yeah. We are producing [ph] -- I just did answer that, Brian. No worries that you asked it again. But as we said -- as I said, we had expected about four prescriptions per year. We are still tracking it in the PPM channel and the preferred pharmacy network and we still think that’s a reasonably good number.Relative to differences in nasal polyps and CS, we don’t frankly have a cut that fine. But I will say, as I have said historically, I am feeling really good about the growth in both refills and new prescriptions.At this point in the launch, we are 15 months, 16 months into the launch of the product. We are still seeing really nice growth on new prescriptions and we are seeing real nice contribution as you would expect on refills, meaning there’s potential real -- continued real upside in this business in our view.

[Unidentified Analyst:]

Great. And then could you just help us through the market dynamics and biologics, and some of the product and development for chronic sinusitis, if they were to come to market, how do you see XHANCE fitting into that treatment paradigm? Thanks.

[Peter Miller:]

I will start it maybe and Ramy I will turn it over to you. Number one is that, the biologics we are studying the pre-severe population. So in terms of where we think that fits from our view is likely certainly where patients, where doctors are going to begin in our view is probably in a more severe population.But, probably the most important point about the biologics is, how those products were studied in clinical trials and how they are being used in the market. It’s combination therapy with an intranasal steroid spray.So patients are started on an intranasal spray. If a patient doesn’t get adequate treatment, the recommendation is to go to a biologic. And for that reason, we just don’t view the biologics is necessarily competitive, because we think -- we think we are the most -- a very effective treatment option that patients and physicians should try before going to a biologic. So for that reason, as I said, we don’t really see it as competitive. Ramy, I don’t know if you have anything to add.

[Ramy Mahmoud:]

I would just remind you that these unlike some products are not mutually exclusive they can be used together. The indication that has been granted for Dupilumab is narrower than our indication in two ways, narrower in the sense that, it’s only for refractory patients and it’s narrower in the sense that Peter alluded to that add-on therapy only.So we view that as potentially complementary from a clinical perspective and then from a sort of market access and sort of marketplace perspective, the price difference is sort of a major factor that we think plays in our favor, as we continue to have conversations with different payers.

[Unidentified Analyst:]

Good. Thanks.

[Operator:]

There are no further questions at this time. I would now like to turn the call back over to Peter. Please go ahead, sir.

[Peter Miller:]

Well, we actually -- thanks everybody for joining us. We look forward to our next call.

[Operator:]

Ladies and gentlemen, this concludes today’s conference call. Thank you for participating. You may now disconnect.