OptiNose, Inc.
Q1 2018 Earnings Call Transcript

Published: 14 May 2018

[Operator:]

Good day, ladies and gentlemen and welcome to the OptiNose Q1 2018 Earnings Conference Call. [Operator Instructions]. I would now like to turn the call over to Jonathan Neely, VP of Investor Relations. Please go ahead.

[Jonathan Neely:]

Good morning and thank you for joining us today, as we review OptiNose's first quarter 2018 performance and our plans for 2018. I'm joined today by our CEO, Peter Miller; Ramy Mahmoud, our President and Chief Operating Officer; Keith Goldan, our CFO; and Tom Gibbs, our Chief Commercial Officer. The slides that will be presented on this call can be viewed on our web site, 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 actual results to differ materially from those indicated by such statements. Additional information regarding these factors is discussed under the cautionary note on forward-looking statements section of the earnings release that we issued this morning, as well as under the risk factors section of OptiNose's 2017 Annual Report on Form 10-K and Form 10-Q that are filed with the SEC and available at their web site, sec.gov and on our web site at optinose.com. You are cautioned not to place undue reliance on forward-looking statements. 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 statements, 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:]

Thanks Jonathan and good morning everybody. 2018 is another important year for OptiNose, with the launch of XHANCE and the planned initiation of a clinical program to extend our label, with an additional indication to further increase the potential of the product. Right now, it's still very early in the XHANCE launch, and at this point we'd like to say we are pleased, but not satisfied as we have high aspirations for the potential of XHANCE in the market. As I will detail in a few minutes, we are especially encouraged by physician interest in the product, and by some questionnaire feedback we have received from several hundred patients prior to the first refill of XHANCE. Our payor work is on track, and we continue to remain very focused on not only making sure that we achieve what is necessary at the national level, but also working through the details, the pick and shovel work as I call it, at the level of downstream plans with a focus of understanding what is required by physicians and patients. Starting with slide 3; I would like to begin by highlighting some of our recent key accomplishments. Over the past several months, we had stressed the importance of achieving high brand awareness and sufficient market access during the launch period. I am pleased to report that we have eclipsed our awareness objective at 85% among all ENTs and allergists, achieving 87% based on our recent quantitative market research and have made great progress on market access. Nationally, we believe that approximately 74 % of commercial lives are in a plan and which enhances cover based upon third party syndicated data and internal analysis. Against our early launch phase goal of tier-3 formulary position for XHANCE, that is either unrestricted or only requires a single step edit for 65% of commercial lives, we currently stand at 61%. Our tech ops team beat our timelines for product supply, which enabled the launch of our innovative trial program called XHANCE Xperience in early March, followed by the full retail launch of XHANCE in April. We ship products into both the mail order pharmacy we are using for the Xperience program and into the retail channel in the first quarter to support the launch, which are the revenues we are reporting today. As I mentioned, while it is early in our launch, we are very encouraged by the physician interest we are seeing in the product. This is evident in our market research work, and I have personally seen it in 8 field rides interacting with over 60 physicians. Maybe most importantly though, physician interest is reflected in actual prescribing, especially in our Xperience program, and I will go into more detail on that later in the presentation. We also made progress towards a goal of a follow-on indication for XHANCE, for submission to FDA of key elements of the trial design for our chronic sinusitis program, which we plan to discuss at a meeting scheduled to occur in the next few months. Pending the outcome of that meeting, we plan to initiate the program before the end of the year. And finally, we continue to build the capabilities of our organization with a focus on areas that are critical for a commercial stage company. I feel terrific about the great people we have brought into our organization and about the vibrancy of our culture as we aspire to build a leading ENT/Allergy company. Turning to slide 4, in preparation for our launch of XHANCE, we analyzed over 300 product launches between 2010 and 2016 to understand the key factors that drive success. What we found is that successful launches are differentiated from unsuccessful launches by four key factors. First, we need an attractive market that has a high degree of unmet need. Second, we need an importantly differentiated product, not just different, but different in a way that makes an important difference for patients. Third, you need a high product awareness among prescribers, and fourth you need sufficient market access. As I will review in the slides ahead, we believe that with XHANCE, we are entering in a market and have a product that delivers very strongly on the first two factors, and as I shared before we have worked over the last several months to meet our goals for the remaining two factors, awareness and market access. I want to talk a little bit more about each of these. Turning to slide 5; Data on epidemiology of Chronic Rhinosinusitis or CRS, the broad category of inflammatory disease, for which XHANCE is being developed, shows a large population and evidence suggests there is a high unmet need. The condition is believed to affect approximately 30 million adults in the U.S., who generally suffer from moderate to severe symptoms. An estimated one third of the overall CRS populations develop nasal polyps, and this is the first indication that we received from the FDA, is for the treatment of nasal polyps in adults. Of the population of 30 million, we estimate that approximately 9.75 million patients are actively receiving treatment via physicians. In the first wave of our commercial plan, we have entered the ENT and allergy specialty market where approximately 3.5 million CRS patients are treated, roughly 1.2 million of whom we estimate have nasal polyps. This is a desirable high density market, with these patients being treated by a relatively small audience of only about 15,000 ENT, allergy, and primary care physicians. We openly plan to reach 14,000 physicians in this audience with approximately 120 sales representatives, and the remaining 1,000 physicians through digital and non-personal promotion. So, the target market is large and reachable. The disease burden is also high despite currently available treatments, and that high burden is recognized. Although this disease doesn't result in mortality, it has a big impact on quality of life. It's not so much about taking years from life, it's about taking life from your years. Because of the high burden of disease, usually over many years, patients wind up trying a range of alternatives to manage their symptoms. Patients often start with a prescription for an ordinarily topically acting intra-nasal steroids. Unfortunately, data we gained from our market research suggests that 80% of CRS patients are frustrated with the lack of symptom relief they get from traditional steroid nasal sprays. We believe the problem with these treatments is not at the level of the molecular activity of the drug, but the sufficient amount of drug which is topically acting and does not act by systemic absorption as to physically reach the inflamed tissue area to be most helpful. With delivery via traditional nasal sprays, it has long been recognized to be difficult to get the drug high and deep enough to reach those areas of inflammation in CRS. In fact, our market research suggests that 75% of physicians agree that part of the recent traditional steroid nasal sprays don't work well in this disease, it's the inability to get sufficient drug high and deep in the nose. Against the first of the critical success factors for a product launch, we believe it is very clear, we are entering the market with high addressable unmet need. So now it's important, that we offer something that is perceived as meaningfully different that addresses the unmet need. Turning to slide 6; to understand the potential for XHANCE, we did a lot of work to assess physician interest in the product profile. One of the ways to do this is to determine key factors that are most important in influencing physician prescribing called choice drivers, and then understand preference for a new product versus current therapies on these specific drivers. Four of the most important choice drivers in CRS with nasal polyps are, improvement in nasal blockage congestion at week four, elimination of polyps at week 24, improvement in sense of smell and taste, and overall patient satisfaction with the treatment. In a market research with 200 ENTs and allergists, our research shows that after seeing a product profile, specialty physicians perceive exams differentiated from traditional IMS treatments on these four choice drivers. Of course, perceived differentiation of key choice drivers is only important if it translates into an intent to prescribe. So, we asked a sample of approximately 700 physicians, a mix of ENT specialists, allergy specialists and primary care doctors, who have [indiscernible] the XHANCE product profile about their interest in prescribing. We found that between 70% and 80% expressed interest in prescribing XHANCE. As I have now said many times before, this level of interest is among the highest that I have seen in my 30 years of commercializing products, and a strong indication that XHANCE delivers on the second key variable of doing procedures in four differentiated products. Turning to slide 7; I am now going to focus on the remaining two factors that our analysis suggest from going through the ability to drive a successful launch. First, our progress in achieving high product awareness. At the time of our IPO in October, we frankly set a bold goal, to increase our awareness from 28% at that time, to 85% during the launch. I am very pleased to let you know, that through some very innovative programs and strong execution by the team, we have achieved that objective. As we discussed previously, we kicked off this effort, just after the approval of XHANCE, when we started the multichannel digital and non-personnel marketing program to increase awareness of the brand. In November, we also feel that our Clinic Owners Educator Program, which reached approximately 5,000 ENT and allergy physicians, with over 16,000 presentations [indiscernible]. Those efforts raised awareness from approximately 28% in August 2017 to 73% by the end of February 2018. What is new and important now, is that we have 80 territory managers in place, who are targeting approximately 9,000 physicians. Through May 4, our territory managers have reached 54% of targeted physicians, with an average frequency of 3.1. Collectively, all of our efforts have driven aided brand awareness of up to 87% at the end of April, among all ENTs and allergies. Turning to slide 8; last, we move to the fourth critical factor, that we believe enables launch success and market access. Nationally, based upon third party syndicated data and internal analysis, we believe that approximately 74% of commercial lives are in a plan that covers XHANCE. We believe that this is a good position, because in a current environment, drugs that launch immediately after approval, typically face new-to-market restrictions, that result in only about 40% of commercial lives having coverage. Note, that our 74% covered number includes all covered lives, inclusive of lives that are carefree formulary status with unrestricted access, a single step edit, and lives that may require some form of prior authorization. Turning to slide 9; now, turning to a bit more detail on how the 74% of lives break out. While broad coverage is important, we believe it is also important to understand relative difficulty the different types of coverage created for physicians and patients. That is why, we have set a goal to have insurance coverage for XHANCE, in categories, that we subjectively define a sufficiently low hassle, but did not impair product adoption for approximately 65% commercialized during the retail launch. It is at the end of the day, after you know you have insurance coverage of the product, which is the first hurdle. What matters next, is how hard is it for a patient or a doctor to get or write a prescription through the insurance process. We previously defined low hassle market access of Tier-3 formulary status, unrestricted or with a single step edit. As I mentioned earlier, we reached 61% on that measure, and critical to that level of coverage we have achieved so far, is the fact that two of the three largest PDMs in the United States now cover XHANCE in Tier-3, in either unrestricted or with a single step. We expect that this coverage will increase, as we contracted additional accounts in 2018. Given the importance of market access to the success of XHANCE, we remain maniacally focused on the experience of patients and doctors who want to start using the product. Therefore, in the first weeks of launch, we had worked hard to refine or understand the market access, and what constitutes low hassle coverage from the perspective of patients and physicians. For example, while some product authorizations used by payor to control drug use are extensive and extremely burdensome, others are proving to be significantly less of a hassle, for a physician with some step edits. For instance, a prior authorization that only requires a physician to check a box, to confirm prior use of an intra-nasal steroid, is very different than a multi-page prior authorization form, such as those required for some biologic products. Some of the pick and shovel work that I described at the start of the presentation, is enabling our sales team to provide key information at a granular level to the physician and office staff, such as exactly what may be required in a step edit for a prior authorization. In addition to the 61% of lives in a Tier-3 single step [indiscernible] physician, our data suggests an additional 4% of lives have a Tier-3 formulary status, with a prior authorization that only requires prior use of a steroid nasal spray, a level of coverage we also view as comparatively low hassle. As I hope you can tell, we are investing a great deal of energy in understanding the market access landscape, especially at the physician and patient level. As stated, our key focus is on hassle factor, and against the subject that we are evaluating every potential contract and plan to remain agile and to make necessary adjustments in terms of what we believe is best for building our business. Looking forward, our goal is to build a market access, so that by the end of the year, approximately 75% of commercially insured patients have reasonably low hassle coverage of XHANCE. Turning to slide 10; as discussed on the last call on March 5, we efficiently launched XHANCE Xperience, an innovative launch program designed to accelerate early trial and adoption of XHANCE. The Xperience offers physicians and their patients, an opportunity to gain initial experience with XHANCE [indiscernible] in the first two months at no cost to the patient. Lowering payor barriers, compared to ordinary retail prescribing. And by giving physicians early clinical feedback from their own patients. The Xperience program is intended to facilitate trial and adoption, in ways that we believe are superior to traditional sampling programs. We believe Xperience has the potential to produce at higher ROI, to better drive prescribing behaviors, generate real time prescribing and payor coverage data, and provide rapid real world data, that the patient experienced on XHANCE. We expect almost all prescriptions in the first few months of launch to be processed through the Xperience program. As I noted, in the Xperience program, enrolled patients to receive up to two prescription pills of XHANCE at no cost to them. In other words, with a zero dollar co-pay. A mail order pharmacy coordinates fulfillment, shipping product directly to each Xperience patient. If a patient has insurance coverage, the claim is normally adjudicated, but we cover their co-pay, such that the patient's out of-pocket cost is zero. If the patient is not covered, we will also make the product available to the patient at no cost to them. To us, this is effectively a sample. [Indiscernible] in the first month of therapy, patients are offered the opportunity to receive a second month supply at no cost to them, if they are willing to respond to a brief survey about their experience. This provides information about the patients perspective on the new treatment, which we can evaluate in aggregate, and which can be provided at the patient level back to the prescribing physician. Obviously, this launch program had a negative influence and of course the net discount from the second and possibly the third quarter, and we will reduce retail demand during the program period. However, we believe it represents a highly effective vehicle to accelerate adoption and an excellent substitute from much of the traditional volume of one sampling. As stated earlier, we also believe we will more effectively facilitate product adoption by both the physician and the patient. Turning to slide 11; now I'd like to share the progress of our Xperience program to-date, with data through May 4. It's important to note, that these results do not include prescriptions generated through the retail channel. Through May 4, more than, 1,300 unique physicians have written one or more prescriptions through the Xperience program. That represents 29% with whom our territory managers have completed at least one call. That is an encouraging rate of adoption, given where we are in the launch timeline. In addition, we are very pleased to see that the average number of calls required to convert a physician from XHANCE trial, has been approximately two. From a patient perspective, as of May 4, approximately 5,200 units have been dispensed through the Xperience program. Note that we previously reported the number of prescriptions that have been written by physicians, but at this point in the launch, we will now report the number of dispensed units at its hands. As a reminder, prescription to the XHANCE Xperience program are not currently tracked in the national audit data from vendors, including [indiscernible]. Importantly, please remember that we expect almost all prescriptions to be filled through our mail order pharmacy partner during the first few months of launch. Turning to slide 12; before I finish my comments on the progress of our XHANCE [indiscernible], I think it is important to provide an update on how patients are doing on our products, as improving lives for patients is what motivates to believe us on our work, is what we believe will ultimately drive the success of the product. On this front, we are very encouraged, though not very surprised, having seen the results of our clinical research, that the large majority of patients that have participate in our survey report positively on the use of XHANCE. As I detailed earlier in the presentation, as part of our Xperience program, patients are provided the opportunity to get a second month of XHANCE, with a zero out-of-pocket cost, if they answer a short questionnaire on their experience with the product. The results, from 321 patients that completed the survey are detailed on slide 12, with 87% of patients saying they are satisfied, 80% experienced symptom improvement after just a few weeks. 81% preferring XHANCE over the prior therapy; 89% saying they would recommend XHANCE to a friend, and 94% stating the product could be used without difficulty. Given the symptomatic nature of this disease, and the fact that patients who personally feel improvement, and therefore directly understand the benefit of the product, we believe the Xperience program has the potential to drive [indiscernible]. Now to slide 13; to summarize, we believe we are on track, again, each of the four key factors that we identified as necessary for one's success. However, to achieve our aspirations, we know we need to achieve outstanding execution. I'd now like to introduce Keith Goldan, our CFO, who will provide comments on our first quarter results, and perspectives on the rest of the year. Keith?

[Keith Goldan:]

Thank you, Peter, and thank you everybody for joining today. As we reported earlier, OptiNose recognized $865,000 of revenue in the first quarter. It is important to point out, that a large majority of the revenue recognized in the first quarter, was related to inventory shipped in late March to wholesalers, in order to support the retail availability in pharmacies beginning in early April. This revenue is associated with stocking the channel and not with prescription demand. If you have followed pharmaceutical product launches in the recent past, it is worth noting that GAAP accounting rules changed, beginning January 1, 2018. Following the principles of ASC 606, we are now required to recognize revenue at the time of shipment of the product. To do so, we estimate the average selling price or ASP to enhance with specific assumptions per units sold into the retail channel, as well as units sold through the Xperience program. As Peter discussed, the Xperience program is a limited time program, that is part of our launch strategy. By design, the Xperience program is intended to encourage early trial and adoption of XHANCE, by lowering early barriers to trial, and we expect almost all of the early prescriptions to be filled through this program, and not through the retail channel. Patients in the program are eligible to receive two months of treatment and no cost to them, and we support that by paying the patients co-pay, when their insurance covers XHANCE, or by providing the product free, if their insurer does not cover XHANCE, at the time of sale. The result, is that the ASP for units sold through the Xperience program is significantly less than the ASP for the retail channel. While we are not providing formal revenue guidance, I would like to share some perspectives regarding second quarter and full year results for XHANCE. As planned, the Xperience program is expected to be the primary source of demand for XHANCE in the second quarter. While there will be modest levels of prescriptions and shipments into retail, we are focused on the Xperience program, as we believe it will accelerate product uptake and acquisition of product experience that drives future demand. Because of this plan, we expect our ASP and gross margin percentages in the second quarter to be significantly less than they were in the first quarter; because of these circumstances, I caution against straight-line approaches that use total prescriptions and total revenues from the first quarter, along with total prescriptions from the second quarter, to estimate second quarter revenues. Finally, it is important to note, that we are working to maximize patient retention, following the Xperience program. However, the unique low hassle conditions within the program, are not representative of the normal experience for doctors or for patients. We expect some inevitable attrition, as patients move out of Xperience program and are required to exercise the prescription drug coverage, and incur out-of-pocket costs. While we are just reaching the timeframe, we can certainly observe that rate. I will now turn the call back over to Peter for his closing remarks. Peter?

[Peter Miller:]

Thank you, Keith. Turning to slide 15; as described previously, the additional launch of XHANCE in the medium term, we believe significant additional value to be created by adding a supplemental indication for the treatment chronic sinusitis or CS. Against this objective, our development team is also continuing to make progress. Because this is a drug indication which has never previously been achieved in the U.S., we work extensively with external experts to better understand key research issues, such as how to best define the state population, and how to best measure endpoints. Our needs today, is that we plan to discuss key elements of our proposed trial design with FDA, and have already submitted our proposed design elements, in order to question the FDA's support of our meeting only for the next few months. The trials for CS indication are expected to require co-primary endpoints including objective measure information and a subjective measure of symptom release. We have already begun the process of selecting our CRS [ph] study locations. Assuming interactions with the FDA go as planned, we expect to enroll the first patients on our CS clinical trial program in the fourth quarter of 2018. Turning to slide 16, in conclusion, we continue to believe that 2018 is a very important year for OptiNose. We worked hard to put ourselves in a position, to achieve a successful launch and are now focused on superior execution. We understand, that the best laid plan do not survive first contact, and we are closely monitoring our progress and are fully prepared to be nimble and adapting, where appropriate to our evolving market circumstances. We have achieved our goal with 85% aided awareness among the universe of ENT and allergy physicians, who are critical to our wave one target audience. We have also made great progress, in terms of our initial market access goals. We remain focused on increasing market access, at a level that does not create unacceptable physician hassle, to 75% or more commercialized by the end of 2018. We are making progress according to plan, and towards our objective of initiating in fourth quarter, a pivotal clinical program of XHANCE, in pursuit of our future chronic sinusitis indications. And finally, we believe our efforts to strengthen our balance sheet in 2017 will be a benefit in 2018. We ended the first quarter with approximately $210 million in cash as of March 31, and as a result, can now focus our energy on executing our business strategy in 2018. Thank you all. Now I'd like to open it up for Q&A.

[Operator:]

[Operator Instructions]. Our first question is from David Amsellem with Piper Jaffray. Your line is now open.

[David Amsellem:]

Thanks. So just a couple. So first, regarding the XHANCE Xperience program, and thanks for the color on demand in the second quarter. But I just wanted to get a sense of how you are thinking about the second half of the year regarding the actual recognition or ramp in paid revenue generating prescriptions? And I guess the question is, should we be at all concerned that with the heavy sampling and promotional or demand stimulation programs that you could see some softness in demand as you are transitioning to paid or fully paid prescriptions. I just want to better understand that dynamic. And then secondly, regarding the payor landscape, regarding unrestricted versus step edited, can you just talk about the split between unrestricted and the single step among that 61% you cited? Thanks.

[Peter Miller:]

Yeah David. I will take the first one. Thanks for the question. David, I think you know, the Xperience program is not just a sample program. So I want to begin there, but it's a -- we say, heavy sampling. Heavy on the Xperience program, we frankly have scaled back some of our sampling. We just believe, the Xperience program, for all the reasons we outlined in the presentation, driving physician and patient behavior, it's a natural script that gets filled plus we get great data, which is very different. So I know you know that, but I just wanted to begin there. Relative to the transition period, there’s two things going on that I know you know about, which is -- the first is, you have experienced patients transitioning into full revenue patients. So that's something that obviously you will see drop off. We are absolutely counting on the level of drop-off as patients move, probably not just because that they are having to pay, you just normally have drop-off on a prescription as you know, on chronic meds, so we have a factor that we built into that. That's offset, frankly, as you drive, you understand the physician model, and you can probably tell by our data by the way, we have 1,300 physicians, we have got about 5,200 units dispensed. We hope to see significant incremental scripts being written by each of the docs, that we are already calling on. So there is – that’s a positive offset if you will, if you follow my logic. So let's say, if things that we are sort of thinking about, having said all that, because this Xperience program really is something that we have not seen anybody do before, we are going to be figuring it out, as we sort of go along as well. But the thing I remain really bullish on, David, is the physician prescribing, and the number of physicians that prescribe, 1,300 physicians have written almost 30% of the docs that we detailed, and we get scripts written after [indiscernible]. Now we have lowered barriers to make it easier, but as I told you, I have been on all these calls, interacting with all these docs. We really have significant interest on the physician side, and that's what we are trying to generate right now. We believe that's what's going to carry through the back half. Relative to the second question, we are not disclosing that at this point. David, I will tell you, we have a pretty substantial number that are unrestricted though at this point. Tom, do you want to add color there?

[Tom Gibbs:]

Thanks for the question David. And obviously, a very important one. As you may suspect, we are following 263 plans at the local level. At this point in time, we are really collapsing the unrestricted and step edits into one group. But I can tell you, if you look at the national formularies of two of the largest PVMs, they have it as unrestricted.

[David Amsellem:]

And just to be clear, Peter and Tom, when you say step edit, I mean, it's a relatively innocuous one, where it's sort of a check the box exercise, not something where a patient prospectively has to step through another course of a conventional intra-nasal steroid, is that right?

[Peter Miller:]

Yeah. As you know David, the part of the reason we are comfortable, if a patient has used an intra-nasal spray previously, that's the requirement here. The reason we are comfortable is that in our data, 95% of our target audience has previously tried an intra-nasal spray. For the patients, the pharmacists or our specialty pharmacy frankly, can see in their database, they do a look back, that they can see use of an intra-nasal spray previously, they are done. The patient doesn't know anything. The doctor doesn't know anything. If the pharmacist can't see a prescription previously, it is a call to the physician office is what's required and the physician or typically the staff has to answer simple questions if that patient previously used the spray.

[David Amsellem:]

Okay. Thank you.

[Operator:]

Our next question is from Gary Nachman with BMO Capital Markets. Your line is now open.

[Nicole Germino:]

Hi. This is Nicole on for Gary. Within the clinical Xperience program, roughly what percentage of the 5,200 specs dispensed were profitable versus given away?

[Keith Goldan:]

So Nicole, this is Keith. We are not disclosing at this point. Your question is really as to the coverage of the 5,200. We are not disclosing what percentage of those were covered versus non-covered.

[Peter Miller:]

I want to just correct you, it's not a clinical program, and it is a full retail program. I don't think you necessarily meant it that way. This is not a clinical program. This is -- it's being distributed through a direct mail pharmacy, but it's being written in the script.

[Nicole Germino:]

Okay, got it. And just one quick follow-up on the specialty pharmacy, it's only one right now. How much volume can it handle, and at what point would you start to expect to add a new specialty pharmacy?

[Peter Miller:]

I am actually going down there this week, and Tom has been there last week, because we obviously have great demand that's going through the channel. Tom and I both met with CEO of the -- and they feel very good about their commitment to meet their next several months of demand. We certainly will be evaluating adding additional direct mail pharmacies to our channel. We think of this as a variation channel, as a way to distribute our product. So we had our sales team in this week, actually talking about that. So it's certainly part of our plans across the back half of the year, to potentially add, as our volume potentially really picks up, and additional direct mail order pharmacies. But as of now, we feel very good about our partner, who is doing the distribution currently, and they are certainly capable -- their talent has to be [ph] capable to handle demand over the next few months. And by the way, you should imagine, we are forecasting our continued growth of the business.

[Nicole Germino:]

All right. Thank you so much.

[Operator:]

Our next question is from Randall Stanicky with RBC Capital Markets. Your line is now open.

[Randall Stanicky:]

Great. I have a couple. Peter, I know you are focused on the specialty side awareness, the 87% is the high, and you are not focused on the primary care side. But do you have a sense of, how primary care is thinking about XHANCE right now?

[Peter Miller:]

We do in the markets we are in, Randall. I mean, because we do have some primary care docs being the target universe, recalling on of the 8,000 or 9,000 that we initially targeted, Tom, but approximately how many?

[Tom Gibbs:]

2,000.

[Peter Miller:]

About 2,000 are primary care physicians. And we have a substantial number of primary care docs, that have written prescriptions. We have several that are moving to, what we call some more of an adopter versus a trialist. So I can't talk about it broadly, Randall, but I can talk about it in the way we are detailing docs, we are seeing good reaction from the primary care docs we are beginning to talk to.

[Randall Stanicky:]

And when you think about -- you talked about 300 analogs that you have looked at, and now you talk about the parameters as to what works and what hasn't historically. Is there anything that pops out to you in terms of an analog or an example that you think it can follow? I mean, you know, it's still early in the launch. Obviously, the Xperience program is a little bit of the differentiator you guys are targeting, a bit of a unique market relative to some of the past launches with unmet need and so on and so forth. But as you think about the launch curves, were there examples that seem to be more similar to what you expect?

[Peter Miller:]

The one that we keep looking at, Randall, we think is probably the best analogs, and that if you look at the patient population, it's reasonably comparable. If you look at the burn or a degree of unmet need in the market when that product was launched, we think it's reasonably comparable. There is more competition in that market obviously, than we face in our market right now. It's a symptomatic disease, which we think is, again, it's chronic, which is again comparable. The thing you have to adjust for, is they launched a good bit broader, in terms of the footprint when we are launching. So that's the one we look at. But we do -- we obviously adjust it and think of the penetration of the GI docs, not necessarily the broader primary care populations, they are a good bit broader, as you know.

[Randall Stanicky:]

Okay, got it. And then finally, Keith, looks like you spent $30 million in the quarter, if I am not mistaken. Is that a good OpEx run rate? How do we think about the cadence for the year?

[Keith Goldan:]

So the guidance that we have given, Randall, is that for the full year, we expect total OpEx, including sales, marketing, general and administrative, and R&D to fall in the range of $119 million to $125 million. Obviously, we would expect R&D expenses in the second half to begin to grow, as we prepare for the initiation of our pivotal program in chronic sinusitis.

[Randall Stanicky:]

Okay. And that would imply then, just looking to spend this quarter, that SG&A might moderate a little bit?

[Keith Goldan:]

Yeah, I would imply that.

[Randall Stanicky:]

Okay, great. Thanks guys.

[Peter Miller:]

Thanks Randall.

[Operator:]

Our next question is from David Steinberg with Jefferies. Your line is now open.

[David Steinberg:]

Thanks very much. Couple of questions; so obviously XHANCE is a device and devices need to be -- patients need to be trained on devices and your device is -- the exhalation is a little bit different than some of the inhalation devices. Just curious, any color from physicians or patients or patients completing the survey. Has it been fairly easy for the patients to learn how to use a device or any issues that cropped up? And then, secondly polyps aren't really seasonal, but there is some interplay with the allergy season. Can you just remind us, what sort of seasonality there might be, if any, with your product throughout the course of the year?

[Peter Miller:]

Yeah. So the first one David, on how our physicians and patients are finding this device in terms of the use of the device. I have been on all these calls, as I describe David, and the first introduction to the doc, it's new, right. You are blowing, you are not sniffing. I will say though, you get to it pretty quickly, and the doc understanding it. Our territory managers have gotten terrific at demonstrating the device, because probably, it's not hard to demonstrate, because I think you have probably seen me do dozens of times now. So once you get a doc to see it, demoed, we have devices that we actually give the docs and the staff that they can try for themselves. And I think they realize, while this is pretty intuitive, we have great patient support materials, if you go to xhance.com, which is obviously our web site, front and center is a video, I think it's about three minutes right now, that a patient can look and see professionally done, frankly really well done video on the device. All that has resulted in, in the data that we have that says, 94% of patients. And we now have 321 patients who have filled out this questionnaire, we asked them the question, how do you find the device in terms of use? 94% do not have difficulty using the device. So we feel, something that we paid a lot of attention to frankly, in the training of the territory managers, and that on the right [indiscernible], and evident in our data by the way, is that the territory manager is doing a terrific job, on that level. So not taking this lightly, but it's not that hard. Relative to seasonality, there is less seasonality in this business data than what we expect there. And while it may be Tom can add a little bit more, but we do see some exacerbation because of either allergies in the care or some of the trigger factor. But for the most part, it's a reasonably non-seasonal business, as people used to [indiscernible] around. Tom, if you have anything to add?

[Tom Gibbs:]

I think it's fair to say, we believe that patients who have this underlying disease, maybe more prone to allergic or infectious exacerbations, and that may have some seasonality. But I don't think we require analog to draw from -- to determine whether or not we really will experience seasonality in this business. So it's a little bit of an unknown right now.

[Peter Miller:]

You look at the data though, and the current IMS is that, we share with you is that, we tend to get it reasonably balanced through the year, in the current prescription that are written, from the broader disease, Chronic Rhinosinusitis is not the allergic one [ph].

[David Steinberg:]

Great, okay. And then just a quick follow-up, one is a [indiscernible] question and one housekeeping item. So on the housekeeping item, on the OpEx guidance that was $119 million to $125 million, does that include any stock-based comp or any non-cash items, and then sort of bigger picture, we have been doing a little bit of math this morning. Any thoughts on perhaps what over time, your peak sales might be of this product in the United States? Thanks.

[Keith Goldan:]

Sure David. This is Keith. Thanks for your questions. With respect to the OpEx guidance and to answer your question, yes, it is GAAP guidance, so it is inclusive of stock based comp, the non-cash item.

[Peter Miller:]

On the second one David, we talk to you guys a lot, and I feel very good about where we are in the road. But we just started down the road, and I just see a lot of road ahead of us. And therefore, in our view, it's premature to start thinking about where this thinking goes. We are just so maniacally focused on doing the things that are necessary in the near term to have a successful launch. But I would say, that I am very encouraged by, especially the physician reaction, the patient data that we have on people -- handle the survey. And as I told you guys many times, it's why we are so maniacally focused on the payor stuff, we just got to make sure we make it as easy as possible for physicians to write and patients to sell, and that's where our focus is, and we will continue to be on it.

[Operator:]

And I am showing no further questions. I would now like to turn the call back to Peter Miller for any further remarks.

[Peter Miller:]

Well, we appreciate everybody joining us on the call and we look forward to our next call. Thank you very much.

[Operator:]

Ladies and gentlemen, thank you for participating in today's conference. You may now disconnect. Everyone, have a great day.